Amazon might have sold its most expensive dog leash yet. In July 2019, the United States Court of Appeals for the Third Circuit released a now-vacated decision in Oberdorf v. Amazon.com Inc. which may have finally put Jeff Bezos' galactic empire on the backfoot, at least legally.
For years, the retail juggernaut has attempted to deflect liability for potentially defective products sold on its website by arguing that it is not a retailer at all and, as a result, is not subject to the liability imposed on traditional retailers. Under American tort law, sellers may be subject to strict liability for defective products sold to consumers. However, for the most part, courts agreed with Amazon that it is not actually a "seller".
Because of this, Amazon has sidestepped product liability risks that other, more conventional, retailers face. Consumers could otherwise rely on statutes imposing strict liability, as in the United States, or Sale of Goods legislation (as in Canada) setting out implied conditions of fitness and quality that bring contractual liability on retailers when there is a product defect. But with the retail landscape quickly changing through the growth of online marketplaces, such as Amazon, questions arise as to whether or not there are sufficient protections for consumers from the introduction of potentially defective products.
The consequences are significant. Consumers may be left with little or no recourse when a defective product fails and causes significant damage or injury. For example, since many of the products listed on Amazon are manufactured or sold by companies located in foreign jurisdictions, it could be uneconomical to pursue certain claims where service of process is an issue. And that is if the vendor can even be found. Often times, these companies are unidentifiable. Without a recourse against Amazon or online marketplaces, there may be nobody left to sue.
Yet, in what seemed to be the legal equivalent of Luke Skywalker taking down the Death Star in Star Wars: A New Hope, the Third Circuit Appeals Court handed down a judgment in Oberdorf that opened the door to potentially new avenues of recovery. That case involved a retractable dog leash that was purchased on Amazon. When Ms. Oberdorf took her dog out for a walk and the dog lunged, the attached collar broke, causing the leash to recoil into the plaintiff's face and blind her left eye. The Oberdorfs then sued.
Amazon was successful in the lower district court because the Court found Amazon was really no different than the classified section of a newspaper. In other words, Amazon is just a means of marketing and is an online sales listing service, rather than the all-encompassing platform that it arguably is. Therefore, the trial court found that Amazon could not be responsible for the products that are purchased from its website.
But things heated up when the case reached the Third Circuit Appeals court. There, the Court found, based on a 4-part test, that Amazon was a "seller" because of its extensive involvement in the sale transaction. Looking beyond strict dictionary definitions to determine if Amazon was a "seller", the Court considered that:
- Amazon is the only member of the marketing chain available to the consumer for redress.
- The imposition of strict liability on Amazon would serve as an incentive to safety because Amazon exerts substantial control over third party vendors and is fully capable of removing unsafe products from its website.
- Amazon is in a better position than the consumer to prevent the circulation of defective products, being the receiver of reports of defective products.
- Amazon can and does distribute the cost of compensating customers for injuries they suffer from defective products by inserting indemnity clauses in its vendor contracts and by adjusting commission-based fees charged to third party vendors based on the risks posed by each vendor.
What the Oberdorfs' run through the trenches has exposed, to keep this Star Wars analogy alive, is that Amazon may have only succeeded in defending liability in the past because the courts had not caught on to, or properly considered, the extent of Amazon's involvement in a sale. Indeed, now that there is a better appreciation of Amazon's business model in the jurisprudence, the tide seems to be turning. In an even more recent case out of California, Bolger v. Amazon.com LLC, the California Fourth District Appeal Court also found Amazon liable based on reasoning similar to that in Oberdorf. Oberdorf suggests that the best arguments for why Amazon should be liable as a "seller" may lie ahead.
So, how does this all affect Canada, eh? Well, at the time of writing, there are no reported decisions in Canada where the liability of Amazon has been considered under any of the provincial Sale of Goods legislation. But, with surges in online purchases during Covid-19, it is almost inevitable that such a case will make it through the court system. .
Since Canada does not have the same strict liability regime for product defects under which the American cases have been litigated, the relevant consideration for courts here may be whether Amazon can be found liable as a "seller" under the provincial Sale of Goods legislation. Like the American legislation imposing strict liability on "sellers" for product defects, the object of these provincial statutes is consumer protection. Therefore, similar policy considerations over Amazon's control over the sale and plaintiffs' ability to seek redress might be propelled to the forefront of any discussion on liability. In turn, this could form the basis for a Canadian court's finding of liability against Amazon or other online marketplaces.
It is clear the retail landscape has changed and, as online marketplaces like Amazon become consumers' platforms of choice, the litigation shaking down in the United States will have important implications for Canada. We'll be paying close attention to what happens down south to see if we get an installment of the Empire Strikes Back, or if we can skip straight to Return of the Jedi.
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