California May Hold Online Retailers Like Amazon.com Liable for Defective Products

In California, the manufacturers of defective products are strictly liable for injuries that are caused by the defects to people who use the products in the manner in which they were intended. The state extended strict liability to retailers of products in 1964. However, online retailers, including Amazon, eBay, Etsy, and others, have relied on a loophole to escape strict liability. If passed and enacted, a new assembly bill would erase the loophole and expose online retailers to liability when defective projects that are sold on their platforms by third-party sellers injure consumers.[1]

Proposed legislation to end defective products loophole

California AB 3262 was introduced by Assemblyman Mark Stone (D-Santa Cruz) on Feb. 21, 2020.[2] This law would extend strict liability for defective products to online retailers. Currently, product designers and manufacturers are strictly liable for injuries caused by their products. Brick-and-mortar retailers are also liable when they sell products to consumers that are defective and cause injuries. While laws have been in place to hold retailers accountable when they sell defective products that injure consumers, online retailers, including Amazon, Etsy, and eBay have been able to rely on a loophole to escape liability.

The proposed bill notes that online sales have greatly increased over the past decade, growing from less than 5% of retail sales to more than 15% in 10 years. The COVID-19 pandemic has spurred online sales even more. As more people turn to online marketplaces to buy the products that they need, some might be injured when the products that they purchase are defective. Not being able to hold an online marketplace accountable for injuries may leave consumers with limited recourse. Many third-party sellers on online marketplaces are located overseas and may be more difficult to sue. When third-party sellers are located outside of the jurisdictional reach of the courts in California, the inability to hold the online marketplace liable might leave injured victims without legal remedies for their losses.

How product liability cases work

When consumers purchase products and use them as they are intended to be used, they do not expect that a defect in the products might injure or kill them. Unfortunately, people are injured or killed by defective products every year. Because of this risk, California has established consumer protection laws that allow injured victims to file lawsuits against all of the parties involved in the chain of production and distribution to seek legal remedies for their losses. Multiple parties can be liable for defective products, including product designers, manufacturers, distributors, and retailers.[3]

Several types of defects can form the basis of liability, including design defects, manufacturing defects, and inadequate warnings.[4] Design defects occur in the design phase and affect all of the products that are subsequently manufactured based on the defective design. Manufacturing defects happen during the manufacturing process and can affect a single lot of products. Manufacturers must also provide adequate warnings to consumers of the known risks that a product might pose. When the warnings that are provided are inadequate and someone is injured, the injured victim may file a lawsuit based on the inadequate warnings that were provided.

Providing strict liability for retailers, manufacturers, designers, and others involved in the chain of production and distribution of a defective product helps injured victims to recover damages that fairly compensate them for their economic and noneconomic losses. However, with the advent of online marketplaces, people who are injured by defective products that are purchased from third-party sellers may not be able to recover sufficient compensation for their losses.

Strict liability for defective products

Under California law, manufacturers, designers, and retailers are strictly liable for injuries that are caused to plaintiffs when they use defective products in a reasonably foreseeable way. To prove product liability, the plaintiff must prove the following elements:

• The product was defective when it left the defendant’s possession.
• The plaintiff used the product in a reasonably foreseeable way.
• The product’s defect was the direct or proximate cause of the plaintiff’s injury.

Strict liability allows people to hold all of the parties who are involved in bringing a product to the marketplace accountable for their injuries without having to prove negligence. However, the law is unclear about how strict liability might apply to online retail marketplaces. This uncertainty has resulted in the proposed bill to expressly extend strict liability to online marketplaces so that victims can receive the compensation that they deserve when they are injured by defective products.

Opposition to AB 3262

Online retail marketplaces have been able to escape strict liability in California product liability cases by claiming that they are only platforms that connect sellers and buyers rather than directly selling the products themselves. However, the new bill would close that loophole and expose online marketplaces to legal liability for defective products that are sold on their platforms. Recently, Amazon stated that it would back the proposed law if it applies to all platforms no matter how they make money. Online marketplaces make money in three main ways, including charging retailers money to list products, taking a percentage of sales, or charging for advertising on the marketplace.

After Amazon indicated that it would support the law if its proposed changes were made, an amendment was passed to include online retail marketplaces that earn money from advertising sales.[5] Etsy and eBay have said that this proposed change would give Amazon an advantage because many small businesses sell products on Etsy or eBay and could not afford to absorb the potential liability costs that the changes in the law might bring. Opponents to the law argue that the bill will hobble small businesses and drive many out of business.

If AB 3262 is passed, it will be the first law in the U.S. that holds online retail marketplaces liable for selling defective products. The bill has passed the assembly and is now before the state senate. A vote in the state senate on the bill is expected to happen soon. If the law is passed and signed into law by Gov. Newsome, it will provide legal remedies to people who are injured by defective products that they purchase online even if they are unable to hold foreign manufacturers or retailers accountable.

Contact an injury attorney in Los Angeles

Many people are injured by defective products each year. When consumers purchase products, they believe that they are safe and will work as promised. When a product is defective and causes serious injuries, the victim may be entitled to recover damages. Getting help from an experienced injury attorney is important. Product liability cases can be complex and may require in-depth investigations. Contact an attorney at the Steven M. Sweat Personal Injury Lawyers today to learn more about your case by calling us at 866.966.5240 or by filling out our online contact form.

Sources

[1] https://www.sfchronicle.com/opinion/openforum/article/California-should-hold-online-retailers-liable-15511586.php?utm_source=Justia%20Blogging%20Ideas&utm_medium=email&utm_campaign=c544fea8cb-blogging_ideas_injury_20200826&utm_term=0_dba88020e6-c544fea8cb-406640669

[2] https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB3262

[3] https://www.victimslawyer.com/products-liability.html

[4] https://www.victimslawyer.com/defective-products-injury-cases.html

[5] https://www.cnbc.com/2020/08/25/etsy-amazon-trying-to-squash-competitors-by-backing-california-bill.html