SACRAMENTO — The tech industry is closely watching a California proposal that would hold Amazon and other online marketplaces liable for defective products that injure customers. With days left in the legislative session, Etsy, eBay and other tech giants are trying to stop the measure in its tracks.
But there is a surprising new exception: Amazon itself.
"I never thought I’d be sitting down, seeing eye-to-eye, with Amazon," said Assemblymember Mark Stone (D-Scotts Valley) in an interview Monday. "I figured they would always fight this. But they’re realistic. They know what’s coming and they know they are going to have to deal with it."
The retail behemoth — fresh off a bruising appellate court ruling that found it liable for an exploding computer battery that landed a San Diego woman in a burn unit — decided this week to back CA AB3262 (19R) after Stone changed it to apply more broadly to Amazon's competitors.
The development has roiled tensions in the fiercely competitive online retail sector. Tech opponents argue the first-in-the-nation law would drag down a large swath of the economy to solve an Amazon problem, triggering a cascade of lawsuits and driving up costs for retailers and consumers.
The bill strikes at a fundamental question in the digital economy: what does a facilitating platform owe to the main parties involved, whether they be an online retailer or rideshare app — without which a transaction would never have occurred.
"eBay is not a store," the company said in a statement Tuesday. "... While the court recently found that retailers with marketplaces, like Amazon, are liable for the products sold on their sites, AB 3262 goes far beyond the court’s decision and applies the same standard for Amazon to dozens of third-party marketplaces that simply enable small businesses to reach customers.
"Etsy CEO Josh Silverman also assailed the proposed bill, calling it “a wolf in sheep’s clothing” that will be “crushing to smaller ecommerce players."
“With Amazon’s lobbying, AB 3262 has become an increasingly complicated piece of legislation that is going to be expensive for any small or mid-sized business to try to comply with,” he said in a statement Tuesday. ”Amazon is taking bold steps to wipe out its competitors by promoting complex, hard-to-comply-with legislation that only they can afford to absorb.”
Stone said he changed the bill to ensure that all platforms that facilitate and profit from third-party sales, not just Amazon, are accountable for the products they help to bring into the state. The lawmaker and the consumer advocates backing the proposal note that overseas merchants and manufacturers who sell their wares through marketplaces can easily evade lawsuits in U.S. courts. Stone's bill would allow consumers to also sue the company that facilitated the sale, with the exception of used and handmade goods.
Amazon has faced dozens of suits over defective or faulty products sold through its Marketplace. In one set to be heard by Pennsylvania’s Supreme Court later this year, a woman sued Amazon after she was blinded in one eye when a dog leash she bought through the company broke and hit her in the face. In another, a Tennessee family sued over a hoverboard that caught fire and burned down their house.
In the most high-profile case in California, Angela Bolger sued after a replacement laptop battery she purchased from Amazon’s website exploded, causing third-degree burns.
Amazon has alleged that the battery’s Chinese manufacturer, Lenoge, also known as E-Life, is responsible for her injuries and that it merely facilitated the transaction. But a California appeals court ruled last week that the e-commerce giant can also be held liable.“Amazon is a direct link in the chain of distribution, acting as a powerful intermediary between the third-party seller and the consumer,” the appeals court ruled. “Amazon is the only member of the enterprise reasonably available to an injured consumer in some cases.”
Bolger testified at a legislative hearing this month, urging California lawmakers to approve AB 3262. "As long as Amazon and other companies like it are allowed to evade legal responsibility or liability," she said, "horrific events like mine are going to continue."
Brick-and-mortar retailers like Walmart, Target and grocery stores have long been subject to product liability laws, which vary state by state, said Rory Van Loo, a law professor at Boston University who focuses on the intersection of technology and consumer law. But Amazon and other online retailers have been able to avoid the same level of liability for defective or dangerous products.
“When you go into Target or Walmart in person, there’s no doubt that they have the merchandise there and they are the seller,” said Van Loo, who has written extensively on digital markets. “What Amazon has been able to argue is ‘We are not the seller here. We are just linking a consumer to a third-party.”
While California residents may now be able to bring suit against Amazon because of the Aug. 13 decision in Bolger’s suit, the Legislature still may want to make explicit in state law that injured consumers can sue Amazon, Van Loo said.
Passing legislation “would make it clearer and firmer,” he said. “The risk is that Amazon with its deep pockets will always be able to litigate and push injured consumers to go to court to deal with unsettled case law.”
An early version of the bill would have exempted eBay and Etsy, but more recent changes would allow injured consumers to pursue suits against the companies in some cases. The broadened proposal also could affect retail sales on Facebook Marketplace, though according to Stone’s office it would not apply to sites like Craigslist or online classifieds that merely allow listings without further involvement in — or commission from — the transaction.
Amazon blasted the Bolger decision this month in a widely reported statement in which it called the case "wrongly decided" and vowed to appeal. But it took a different tone in a letter to Stone offering support of the newly amended bill.
"The common thread is that all online marketplaces — like all marketplaces everywhere — bring buyers and sellers together and facilitate sales into California," wrote Amazon's vice president of public policy Brian Huseman. "For AB 3262 to be a successful, lasting, and meaningful law, it cannot leave open loopholes for some marketplaces to escape accountability."
