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Consumer Confidential: A Hoverboard Burst Into Flames. It Could Change The Way Amazon Does Business

David Lazarus Los Angeles Times

WWR Article Summary (tl;dr) As David Lazarus reports, "More than half of all the stuff sold by Amazon comes from third parties — a crucial aspect of the company's retail dominance." The question then becomes, who is responsible when something goes wrong with a product?  Lazarus takes a look.

Los Angeles

Should Amazon, which accounts for roughly half of all online sales, be legally and financially responsible for the safety of products sold on the site, including those offered by third parties?

Amazon says no.

A trio of state Court of Appeal justices in Los Angeles this week said otherwise.

"We are persuaded that Amazon's own business practices make it a direct link in the vertical chain of distribution under California's strict liability doctrine," the justices ruled, rejecting Amazon's claim that its site is merely a platform connecting buyers and sellers.

Bottom line: Amazon — and by extension other online retailers — isn't just a bystander when someone purchases a third-party product. It's a key part of the transaction.

And it can be held accountable if that product turns out to be harmful. "Amazon is the retailer. They're the one selling the product," said Christopher Dolan, a San Francisco lawyer who spearheaded the case against the e-commerce behemoth.

"Because of this ruling," he told me, "you can be sure Amazon is rewriting all its rules for third-party sellers, and it's doing it today."

More than half of all the stuff sold by Amazon comes from third parties — a crucial aspect of the company's retail dominance. In the fourth quarter of 2020, that percentage hit a record 55%.

At issue here is a December 2015 purchase of a kids' toy — a hoverboard — by Kisha Loomis, a resident of Oroville in Butte County, north of Sacramento.

Remember hoverboards? They were those self-balancing devices meant to resemble the flying skateboards from "Back to the Future Part II."

The real-world versions weren't nearly as cool as the one Marty McFly rode around the fictional California town of Hill Valley. They had wheels and were powered by lithium-ion batteries.

Trouble was, those batteries had an alarming habit of bursting into flames. That's what happened with the hoverboard Loomis purchased via Amazon from a Chinese manufacturer as a Christmas present for her son.

Less than a week after the holiday, Dolan said, the hoverboard "exploded while charging in a bedroom." Loomis was "severely burned," he said, "as she attempted to throw the burning toy from her home."

As it happens, L.A. firefighters encountered their first exploding hoverboard around the same time Loomis' device blew up. KTLA obtained video of a hoverboard catching fire on a Koreatown sidewalk.

In pursuing his case on Loomis' behalf, Dolan found that the Chinese manufacturer and its U.S. distributor had gone out of business, "leaving only Amazon to be held accountable for the injuries to Ms. Loomis and the damages to her home."

Amazon prevailed in the original case. An L.A. judge agreed with the Seattle company that it was merely an "online advertiser" and not responsible for the third-party products it sells. The lawsuit was dismissed in March 2019.

This week's appellate court decision overturns that ruling, holding Amazon accountable for the products it allows third parties to sell on its website.

The appellate justices cited Amazon's "substantial ability to influence the manufacturing or distribution process through its ability to require safety certification, indemnification and insurance before it agrees to list any product."

An Amazon spokeswoman, requesting anonymity even though she's, you know, a spokeswoman, declined to comment on the new ruling or whether Amazon will appeal it to the state Supreme Court.

She said only that "Amazon invests heavily in the safety and authenticity of all products offered in our store, including proactively vetting sellers and products before being listed, and continuously monitoring our store for signals of a concern."

Product liability experts told me this week's decision makes clear that online merchants are just that — merchants — and can't hide behind their connecting-the-world technology to shield them from responsibility for distributing unsafe goods.

"I'd like to say this shouldn't even be a debate," said Alex Harman, competition policy advocate for Public Citizen. "But getting some clarity on this is really helpful."

Carl Tobias, a law professor at the University of Richmond, said the ramifications of the ruling "are potentially substantial for Amazon and other online retailers."

Rachel Weintraub, legislative director for the Consumer Federation of America, called the ruling "incredibly important."

"Consumers do not realize that some platforms claim they are not acting as a retailer when they purchase from them online," she told me. "This decision will help consumers obtain redress."

Product safety has been a hot topic lately. I wrote the other day about Peloton refusing to recall a treadmill linked to the death of a child and possible harm to dozens more.

Although the federal Consumer Product Safety Commission issued an "urgent warning" about the Peloton Tread+ exercise machine, Peloton rejected the notice as "inaccurate and misleading," and said "there is no reason to stop using the Tread+."

The CPSC relies for the most part on companies voluntarily recalling questionable products. It also is prevented by law from alerting consumers about potentially dangerous goods without a company's permission. This week's Amazon ruling lays down a legal marker that consumers can demand satisfaction from online merchants for the goods they sell, regardless of whether those goods originated elsewhere.

Dolan said Amazon is now almost certainly informing its third-party sellers that they will have to be adequately insured if they want access to the company's vast customer base.

He said the company also will be much more mindful of any reports of potentially dangerous products and will act more quickly to halt any such sales.

I asked if he's worried about Amazon taking the case to the California Supreme Court.

"I hope they do," Dolan replied. "But I don't think they will. They can read the tea leaves."

And those tea leaves say consumers just scored a big win.

Distributed by Tribune Content Agency, LLC.

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