A decision and order issued this week by the Consumer Product Commission requires online retail giant Amazon to change its policies regarding third party products after some were found to be hazardous.
According to a Tuesday press release from the CPSC, “Amazon must submit proposed plans to notify consumers and the public about the hazardous products and to remove the products from commerce by incentivizing their return or destruction.”
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More than 400,00 items sold through Amazon’s “Fulfilled by Amazon” program are subject to the order. These include faulty carbon monoxide (CO) detectors, hairdryers without electrocution protection, and children’s sleepwear that violated federal flammability standards.
A little more than three years ago, the CPSC issued an administrative complaint against the company. In response, Amazon – a company with $575 billion in revenue – argued before an Administrative Law Judge (ALJ) and the commission that it was not a distributor and bore no responsibility for the safety of the products sold under the program.
“The ALJ rejected Amazon’s argument, holding that Amazon acted as a distributor in this matter. The Commission affirmed that holding in today’s decision,” said the CPSC. It determined in a unanimous vote that “Amazon was a ‘distributor’ of products that are defective or fail to meet federal consumer product safety standards, and therefore bears legal responsibility for their recall.”
Last February, The Street reported that Amazon was getting 50% of the revenue from every third-party sale on its platform, citing a survey from Marketplace Pulse.
“Amazon reported third-party seller service revenue of $117.7 billion in fiscal 2022, according to FactSet,” said the report. “Seller service revenue represented 23% of Amazon's total revenue –- coming in second only to online store revenue that totaled 43% at $220 billion.”
Per the CPSC, platforms and services that act as a distributor of third-party seller items can be held responsible for providing remedies to consumers. However, it said Amazon failed to notify the public about these hazardous products. Furthermore, the commission said the company didn’t do enough to encourage consumers to return or destroy the potentially hazardous items, increasing the likelihood of risk and injury.
“Amazon also claimed that sending messages to initial purchasers about ‘potential’ safety issues and providing initial purchasers with Amazon.com credits – rather than refunds incentivizing product return or destruction – were sufficient to remedy the product hazards,” said the CPSC. “The Commission, as well as the ALJ, disagreed, finding Amazon’s actions inadequate to protect the public.”
Now, Amazon must work on developing plans to notify anyone who might have one of the hazardous items. The CPSC said it will consider Amazon’s proposed plans, which it will address in a future order.
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