Amazon is entangled in local legal cases that could set off lawsuits for third-party products sold on its platform.
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May 27, 2021—Emerging legal rulings holding online retailers liable for defective third-party products could cause a ripple effect of lawsuits if more courts across the nation adopt that position, according to a panel of legal experts at an event hosted by the Information Technology & Innovation Foundation on Wednesday.
Product liability law has traditionally held that the “seller” of products are responsible for the defects those products may have. You buy a curling iron from Target, for instance, not directly from Dyson. Target is the seller, and in the case of product defection, Target may be the responsible party.
But Amazon has avoided the legal distinction of seller until recently by arguing that they merely act as the middleman in transactions, and that when items are purchased from its website, business is done directly with the manufacturer, which would be responsible in any legal proceeding. Some have argued that this insulation from liability has made e-commerce companies like Amazon far too powerful.
But two rulings in California and one outstanding case in Texas are challenging that assumption.
In one of the California cases challenging the precedent, Angela Bolger bought a laptop computer battery from Amazon.com. The listing for the battery identified the seller as “E-Life,” a company that doesn’t actually exist (Lenoge is the technical company, which wasn’t listed). Several months after the purchase, Bolger was severely burned when the battery she ordered exploded.
In an appeal, Bolger’s lawyers argued that because the package passed through an Amazon-branded warehouse, was prepared for shipment in Amazon-branded packaging, and then sent to Bolger, Amazon is classified as a distributor of the product. Amazon placed itself between Lenoge and Bolger in the chain of distribution, which, according to her lawyers, should make them a responsible party. And the jury agreed.
In the second California case, the trials court sided with Amazon when the plaintiff filed suit for sustained injuries stemming from a defective hoverboard, which she purchased from a third-party seller off of Amazon’s website. The Court of Appeal reversed the trial court’s ruling, however, applying the Bolger ruling and confirming that the ruling properly applied strict product liability law to the facts of its case, and was therefore correctly decided.
McMillan v. Amazon.com is currently being heard by the Texas Supreme Court—the first time this legal precedent has crossed state boundaries. Robinson believes that the precedent crossing state lines could be a sign of a shift in legal attitude toward online retailers nationwide.
Taken together — if the Texas court rules similarly to the California cases — a trend may emerge in which other states follow suit and label Amazon a seller, holding them liable in intermediary liability cases.
“I’m not exaggerating when I say this is probably the most important product liability issue that’s arisen in the past 50 years,” said Jeremy Robinson, a partner at law firm Casey Gerry.
While all of the panelists present at the event said they could understand the legal rationale distinguishing Amazon as a seller, some saw brewing legal storms underneath, such as how the law would be applied to other online retailers like eBay and Etsy.
“When you buy a product off Amazon you don’t interact with the third-party seller, you interact with Amazon,” Robinson says, “and all of these things basically make Amazon a retailer. So, Amazon should take the responsibilities of being a retailer, as well as the benefits—and obviously they’re getting a lot of benefits.”
“Where do you draw the line?” Robinson later asked.
Other ecommerce websites like eBay and Etsy have a more direct relationship between sellers and buyers. Amazon may be an easy target because Amazon doesn’t always make it clear who exactly you’re doing business with, but that doesn’t mean that other online marketplaces will remain exempt from the liability protections they have previously enjoyed.
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Reporter Tyler Perkins studied rhetoric and English literature, and also economics and mathematics, at the University of Utah. Although he grew up in and never left the West (both Oregon and Utah) until recently, he intends to study law and build a career on the East Coast. In his free time, he enjoys reading excellent literature and playing poor golf.
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Klobuchar was able to rally Democrats and Republicans to support her bill, but its future depends upon a shaky alliance.
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WASHINGTON, January 21, 2022 – Senators on the Senate Judiciary Committee have formed a tenuous, bipartisan alliance to curb allegedly anticompetitive behavior by large tech companies.
During a Thursday markup, the Senate Judiciary Committee voted 16-6 to send the American Innovation and Choice Online Act, S. 2992, to the Senate floor. The bill would prohibit certain companies with online platforms from engaging in behavior that discriminates against their competitors.
There is a laundry list of violations and unlawful behaviors enumerated in the bill, including unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.
This bill would only apply to companies with online platforms that meet one of the following criteria:
Sen. Amy Klobuchar, D-Minn., the sponsor of the bill, referred to the bipartisan effort as “the Ocean’s 11 of co-sponsors,” featuring a diverse line-up of legislators, from Sen. Josh Hawley, R-Miss., and Sen. John Kennedy, R-La., to Sen. Dick Durban, D-Ill., and Sen. Richard Blumenthal, D-Conn.
Klobuchar spoke directly about the need to target large companies, “We have to look at this differently that just startup in a garage – that is not what they are anymore. They may have started small, but they are [now] dominant platforms,” she said. “For the first time, the monopoly power is going to be challenged in what I consider to be a smart way.”
At the outset of the meeting, there were more than 100 amendments proposed by members of the committee, but by its conclusion, more than 80 of them had been withdrawn.
One of the amendments that worked its way into the bill was a markup that exempted subscription-based services from complying with the legislation, allowing services like Amazon Prime and Netflix to promote their own content above others’.
“The bill strikes the right balance between preventing the conduct that hurts competition, while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad, and maintain services that benefit consumers,” Klobuchar said.
Though there were big names on both sides of the aisle supporting the bill, the alliance seemed fraught. Despite being supportive of the bill, Kennedy made it clear that his support was conditional. “I am a co-sponsor of this bill, but this bill is going to change – it is going to change dramatically,” he said. “I hope to be in the room when those changes are made, otherwise I will be off this bill faster than you can say ‘Big Tech.’”
Some of Kennedy’s criticisms harkened back to Section 230 issues raised by former President Donald Trump – calling some of the targeted companies “killing fields for the truth,” and stating that “their censorship is a threat to the first amendment.”
Despite his criticisms, Kennedy echoed other senators, both Republican and Democrat, who emphasized that they did not want the perfect to become the enemy of the good. “All we have done [for five years] is strut around, issue press releases, hold hearings, and do nothing. So, this is a start.”
Klobuchar also received push-back from members of her own party, with Sen. Dianne Feinstein, D-Calif., stating that she was critical of the bill because it is designed to specifically target large tech companies, many of which are based out of California (though she ultimately voted to advance the bill to the Senate floor).
Hawley rebuffed Feinstein in his comments, stating that he supports the bill for the same reason Feinstein refuses to. “[Feinstein] pointed out – I think rightly – that this bill is very specific and does target specific behavior – anti-competitive behavior – in a specific set of markets. I think that that’s a virtue and not a vice.”
The measure must be passed by the full Senate, as well as the House, before it goes to the president for his signature.
Will Hurd and Member of Parliament Damien Collins say disinformation on social media platforms a worry in midterm elections.
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WASHINGTON, January 11, 2022 – Former Republican Rep. Will Hurd said that disinformation campaigns could have a very concerning effect on the upcoming midterm elections.
He and the United Kingdom’s Member of Parliament Damien Collins urged new measures to hold tech and social media companies accountable for disinformation.
Hurd particularly expressed concern about how disinformation sows doubts about the legitimacy of the elections and effective treatments to the COVID-19 virus. The consequences of being misinformed on these topics is quite significant, he and Collins said Tuesday during a webinar hosted by the Washington Post.
The Texan Hurd said that the American 2020 election was the most secure the nation has ever had, and yet disinformation around it led to the insurrection at the Capitol.
The British Collins agreed that democratic elections are particularly at risk. Some increased risk comes from ever-present disinformation around COVID and its effects on public health and politics. “A lack of regulation online has left too many people vulnerable to abuse, fraud, violence, and in some cases even loss of life,” he said.
In regulating tech and media companies, Collins said citizens are reliant on whistleblowers, investigative journalists, and self-serving reports from companies that manipulate their data.
Unless government gets involved, they said, the nation will remain ignorant of the spread of disinformation.
Tech companies need to increase their transparency, even though that is something they are struggling to do.
Yet big tech companies are constantly conducting research and surveillance on their audience, the performance of their services, and the effect of their platforms. Yet they fail to share this information with the public, and he said that the public has a right to know the conclusions of these companies’ research.
In addition to increasing transparency and accountability, many lawmakers are attempting to grapple with the spread of disinformation. Some propose various changes to Section 230 of the Telecom Act of 1996.
Hurd said that the issues surrounding Section 230 will not be resolved before the midterm elections, and he recommended that policy-makers take steps outside of new legislation.
For example, the administration of President Joe Biden could lead its own federal reaction to misinformation to help citizens differentiate between fact and fiction, said Hurd.
To find the best way to regulate technology, antitrust regulators need more tools to maintain fairness in the digital economy.
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LAS VEGAS, January 7, 2021 – The head of Patreon’s global policy team said federal regulators need more resources to stay informed about technology trends.
Laurent Crenshaw told CES 2022 participants Friday that Congress should provide tools for agencies like the Federal Trade Commission to enforce consumer protection standards.
“I’m not going to say that big tech needs to be broken up, but there should be appropriate resources for federal regulators to understand the digital marketplace,” he said. “We’re are still living in a world that is dominated by big actors, and we’re debating about whether to even give federal regulators the power to understand how the marketplace is moving toward digital.”
Crenshaw of Patreon said that more resources were necessary at the FTC in order to understand the digital marketplace. Patreon is a membership platform that provides a subscription service for creators to offer their followers.
Such resources would empower the agency to place appropriate safeguards for smaller technology innovators. “So in 10 [or] 20 years, it’s not just the replacements of the current Google, Apple, or Facebook, but something entirely new,” he said.
Panelists echoed Crenshaw’s point that consumer welfare should guide competition policy. Tyler Grimm, chief counsel for policy and strategy in the House Judiciary Committee, said that antitrust should bend to the consumer welfare standard. “Antitrust should leave in its wake a better economy,” he said.
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