Amazon’s Newest Product Safety Headache

When it comes to product safety, it’s sometimes hard to say exactly who is responsible when a product fails. As far as the Consumer Product Safety Commission (CPSC) is concerned, the answer is simple: everybody. That’s why every player in the supply chain, from manufacturer to importer to distributor, has a legal responsibility to voluntarily report a failure to the CPSC.

That’s why Amazon’s newest product safety headache is, I believe, incredibly relevant. So, what’s happened that may increase your ability to compete with Amazon? In my view, it’s really more a leveling of the playing field— here’s why. An administrative law judge has ruled that Amazon acts as a “distributor” with respect to products that Amazon sells to consumers through the “Fulfillment by Amazon” (FBA) Program. What does that mean for you specifically? It greatly improves the CPSC’s ability to regulate the ecommerce space when it comes to Amazon, now the same as applies to you as a distributor.

We talked last year about a CPSC complaint filed seeking to force Amazon to remediate dangers allegedly posed by certain products sold through the FBA program. In the administrative complaint, the CPSC alleges the products — children’s sleepwear, carbon monoxide detectors, and hair dryers — constitute substantial product hazards. Amazon notified consumers who purchased the products of the potential hazards and offered refunds in the form of an Amazon gift card. However, the CPSC has said these actions are insufficient under the CPSA’s mandatory corrective requirements for hazardous products.

Perhaps you’re asking this logical question: what exactly does this arm wrestling between the CPSC and Amazon have to do with me as a distributor? The answer is significant — the CPSC just put you and Amazon on a level playing field when it comes to product safety responsibilities. Amazon’s classification as a “distributor” is crucial because “distributors” (like you) are subject to CPSA recall requirements and the CPSC’s related authority. On the other hand, “third-party logistics providers”— which Amazon argued was the appropriate classification for third-party sales, are excluded from the Act’s requirements with respect to substantial product hazards.

Seems like there should be an easy distinction, right? There is: under the Consumer Product Safety Act, a “distributor” is defined as “a person to whom a consumer product is delivered or sold for purposes of distribution in commerce, except that such term does not include a manufacturer or retailer of such product,” That’s clearly different from a “third-party logistics provider” which is defined as “a person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”

Commenting while issuing this critical decision for those in our industry fighting David and Goliath-style with Amazon, Judge James E. Grimes said: “Amazon meets the statutory definition of the term distributor” with respect to products in its fulfillment program, and “it doesn’t fit an exception for logistics providers.”

According to Boaz Green of Neal Cohen Law, LLC, Amazon already participates in a reporting program in which it provides data to the CPSC, “[i]f the ‘distributor’ categorization sticks, Amazon would have to make monthly reports to the CPSC and negotiate recalls,” he told Bloomberg Law. In addition, the company would announce recalls in its own name, he said. But “more scary for Amazon” is its duty to report hazards from “all this information that sits there” in product reviews, customer return forms, and warranty documents.” And that? That’s the real new safety headache for Amazon.

“We are aware of the judge’s latest ruling in this case,” Amazon said in an emailed statement to Bloomberg. And “while we continue to disagree with the notion that we are a distributor, we share CPSC’s commitment to customer and product safety and will continue working toward that goal,” it said.

At least you know now, when your customer tells you they can get it cheaper on Amazon, that the ecommerce giant you’ve been competing against all these years will now have to have the same commitment to sustainable sourcing and product safety and, like you, will likely be passing the additional cost on to the client. Leveling the playing field, indeed.