Day 2: Everything AmazonDay 2: Everything Amazon

Why Amazon is now pledging to make good on bad third-party products

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Amazon has long contended that it shouldn't be held legally liable for defective products sold by third-party merchants on Amazon.com, maintaining that the liability rests with the seller, not with the marketplace facilitating the sale.

It's a legal argument with parallels to those made by Facebook and other social networks about their own liability for content on their platforms.

But in a surprise twist, Amazon recently announced that it will directly compensate customers for valid claims of property damage or personal injury caused by third-party products sold on its platform, up to $1,000, or more in certain situations.

The program begins next week.

"It's a big deal because Amazon is coming to the table," offering to handle the problem for consumers and third-party merchants, said Venkat Balasubramani, a Seattle-based technology attorney and co-founder of the Focal PLLC law firm. 

However, as he notes, Amazon isn't accepting legal liability. In that way, it's also a strategic move that addresses Amazon's own legal and regulatory challenges.

Amazon is taking voluntary responsibility for defective third-party products on its own terms, trying to show that it's addressing the problem without the need for regulation or legislation. By maintaining that it's actually "going far beyond" its legal obligations, it's also seeking to avoid playing by other people's rules.

The move comes as a series of court rulings threaten to subject Amazon to greater liability for products sold on its platform, which could have vast financial implications for the company.

Legal commentator Eric Goldman once warned that it could even force the company to shut down its marketplace, focusing on first-party retail sales.

Another important backdrop for the policy is a suit recently filed against Amazon by the U.S. Consumer Product Safety Commission (CPSC), seeking to force the retailer to accept legal responsibility for recalling defective products sold on its marketplace.

"This is just Amazon seeing the storm coming, trying to get ahead of it, and covering their butts," said Jason Boyce, a former Amazon seller, founder of Avenue7Media, and author of "The Amazon Jungle."

Asked why the company decided to launch the new program now, a spokesperson said the move "builds on the continued investment we’ve made in helping sellers grow their businesses, and in protecting our store from fraud and abuse."

Amazon says it spent $18 billion in 2020 on logistics, tools, services, programs and personnel to support third-party sellers.

On this episode of Day 2, GeekWire's podcast about everything Amazon, we discuss the new policy with Balasubramani and Boyce, and explore the implications for consumers, third-party sellers, and the company.

Read more on GeekWire. 

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