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Amazon agrees to pay shoppers up to $1,000 for defective goods after facing high-profile liability cases

The e-commerce giant, which has faced regulatory scrutiny for offering dangerous products on its marketplace, said it might pay more than $1,000 if third-party sellers of defective goods don’t respond or reject claims the company believes are valid

Amazon introduced a new policy Tuesday to compensate customers up to $1,000 for defective goods purchased on its marketplace that cause property damage or personal injury. (Patrick T. Fallon/AFP/Getty Images)
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SEATTLE — Amazon will pay customers up to $1,000 for defective products sold on its marketplace by third-party merchants that cause property damage or personal injury, after facing lawsuits in which it has argued that it bears no responsibility for those claims.

And the e-commerce giant said it might also cover claims above $1,000 if the third-party seller “is unresponsive or rejects a claim we believe to be valid.” The company announced the new policy in a blog post, and said it would start Sept. 1.

Product liability cases have dogged Amazon in recent years as it emerged as the nation’s largest online retailer, in part by turning its store into an online bazaar fueled by millions of third-party vendors. By prioritizing a vast selection, the company has allowed merchants to sell on the site with scant vetting. And while the company defends its screening processes — which uses machine learning technology, among other processes, to identify risky sellers — it has faced suits across the country over defective items that hurt customers and destroyed their property.

(Amazon founder Jeff Bezos owns The Washington Post.)

One thing Amazon made clear in its new policy: it continues to believe it is not legally responsible for defective products sold by third-party merchants on its site. Those vendors remain liable for the products they sell, spokeswoman Cecilia Fan said. In its blog post, Amazon wrote that the new policy goes “far beyond our legal obligations.”

Burning laptops and flooded homes: Courts hold Amazon liable for faulty products

More than 80 percent of Amazon’s defective product claims are for less than $1,000, the company said in its post. The company couched its policy regarding paying claims above that threshold, writing that it “may step in to pay claims for higher amounts” if it believes the seller is unresponsive or has rejected a valid claim.

The fact that the company isn’t more definitive makes the claim “cheap talk,” said Justin “Gus” Hurwitz, a University of Nebraska at Lincoln law professor and director of the Nebraska Governance and Technology Center.

The new policy is likely driven by legal and regulatory efforts to push Amazon to accept greater responsibility for selling defective goods, Hurwitz said. Last month, the Consumer Product Safety Commission sued Amazon, accusing it of refusing to recognize regulators’ authority to force the company to recall defective and unsafe products.

And in April, a California appeals court found that Amazon could be held liable in that state for burn injuries caused by an allegedly defective hoverboard sold by a third party on the marketplace, even though the e-commerce giant did not warehouse or ship the product. Amazon has also won product liability cases, such as one in Texas in June, when the state Supreme Court ruled that the company could not be held liable for the injuries of a toddler, who ingested a battery from an allegedly defective remote control sold on the Amazon site by a third party.

Federal regulators sue Amazon over firm’s refusal to recall dangerous products

“I suspect Amazon could see the handwriting on the wall,” Hurwitz said. “They are trying to forestall future litigation and legislation that could be difficult for them.”

Amazon said the new process will be streamlined, putting it in the position to respond to customer claims, and having it pursue sellers. Under the current policy, customers have generally had to resolve disputes with third-party sellers on their own. Some customers have complained that sellers of defective goods are effectively judgment-proof, particularly those based in China who are beyond U.S. jurisdiction and difficult to track down.

That inability to hold those merchants accountable has led customers, such as Angela Bolger, to sue Amazon. Bolger bought a $12.30 replacement battery for her laptop from a third-party seller on Amazon in 2016. The battery caught fire and caused third-degree burns on her arms, legs and feet, as well as burning her bed, clothes and the floor of her San Diego apartment.

Amazon ripped over product safety concerns

Bolger sued Amazon and won, in part because the third-party seller, a Chinese company, couldn’t be found, making Amazon the only viable defendant. Bolger and Amazon are now scheduled to argue damage claims in October.

The new policy would not have mattered much to Bolger, her lawyer Jeremy Robinson said, because her claims exceeded $1,000.

“They are trying to position it so they are not going to be on the hook for major damages,” Robinson said.

Amazon has argued in court that the fact the item was sold by a third party absolved it of any liability.

The new policy also requires third-party sellers to obtain product liability insurance once they hit $10,000 in sales in a month, according to an email that was sent to sellers. Previously, Amazon required sellers to obtain insurance when they hit $10,000 in sales for three consecutive months on the site.

Amazon is also giving sellers the option to buy insurance through a network of providers it has arranged with an insurance broker.