Risk you may not appreciate about buying from Amazon

http://www.nytimes.com/2022/04/21/opinion/amazon-product-liability.html

What You Don’t Know About Amazon

April 21, 2022

Credit…Illustration by Ben Denzer; source photographs by Paul Denzer
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By Moira Weigel

Ms. Weigel is an assistant professor of communication studies at Northeastern University.

When Carey Gartner ordered a TV remote on Amazon in 2017, it arrived promptly at his home in Texas, most likely in one of those standard brown boxes with the company’s logo: an arrow tilting up in a half-smile. A year later, the battery cover popped off the remote, exposing a lithium battery, and Gartner’s 19-month-old swallowed it, severely burning and permanently damaging her esophagus, according to allegations in a court filing. His wife, Morgan McMillan, sued Amazon on their daughter’s behalf.

Last June, the Supreme Court of Texas ruled that Amazon was not liable for her injuries, because even if the company had listed, warehoused and delivered the remote control, it had not sold it. The seller was a third-party merchant with an address in China, who had registered an account with Amazon under the name Hu Xi Jie. Ms. McMillan subpoenaed Mr. Hu through Texas’ secretary of state, but he did not respond to the subpoena, if it ever reached him, or to a request from Amazon for information.

“It’s like whack-a-mole,” Jeff Meyerson, the Gartner-McMillan family’s attorney, told The Times. “You can’t find these entities when it’s time for them to compensate anybody.” Amazon removed the product from its website, but the family was out of luck. (An Amazon representative told The Times, “Amazon invests heavily in the safety and authenticity of all products offered in our store, including proactively vetting sellers and products before being listed and continuously monitoring our store for signals of a concern.”)

If you are like most Americans, you think you know Amazon. Recent polling shows that 72 percent of us view the company favorably. This makes it the second-most-trusted institution in the country, after the military. A 2018 study found that Amazon is the only institution to appear among the five most trusted by both Democrats and Republicans. And the Covid pandemic has made Amazon ever more dominant. Industry research estimates that there are now 153 million Prime members in the United States, nearly as many as the number of voters in the 2020 election. About 40 percent of online purchases in the country take place on the site, at the low range of estimates — compared with roughly 7 percent on the site of its closest competitor, Walmart.

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Over the past few years, Amazon has mostly avoided the crisis of trust that has engulfed other tech companies. It has had no Cambridge Analytica scandal. There have been no Amazon Papers. Despite some initial difficulties, the pandemic has strengthened its position. Amazon stock prices increased by more than a third since March 2020. This year, as the value of Meta crashed, Amazon’s stock suffered a relatively minor decline. CNN ran its stock market story with the headline “Amazon Is the Anti-Facebook.”

If you are reading this, there’s a good chance you’re an Amazon customer. And if you feel guilty about that, it is probably because you are thinking about the warehouse and delivery workers whose labor Amazon exploits, the small merchants whose successful products Amazon copies, the beloved local bookstores whose bottom lines they undercut. Or maybe you just think about all the boxes piling up by your door.

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You should feel guilty. I do, anyway. Convenience is not a good reason to participate in exploitation or waste. But guilt is a weak political emotion. In my experience, it can easily lose out to the 3 a.m. realization that Baby Two has soaked through her sleepsack and we need more Huggies Overnites ASAP.

But a series of product safety cases that have been brought against Amazon over the past few years makes clear that its rewiring of retail poses risks to customers as well. Above all, the cases highlight a significant gap between how most people understand the world’s largest e-commerce company and what that company actually does.

Conversations about Amazon tend to emphasize the company’s omniscience — the cutting-edge technologies that it uses to gather data on its competitors and customers and to discipline its workers. But in reality, as the scholar Miriam Posner has written, supply chains that drive global capitalism depend on “partial sight.” Companies are able to get customers so many things so cheap and fast because they know only what they have to; toward everything else, they often turn a blind eye. The fact that Amazon could not reach Mr. Hu is a straightforward consequence of the business plan.

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You may think you know Amazon, but the odds are you don’t know Amazon, and one big thing you don’t know is how much Amazon itself does not know. As the Gartner-McMillan family learned the hard way, that ignorance can hurt you.

By the mid-2000s, Amazon was recruiting third-party sellers. If you owned, say, a chain of shoe stores, a representative might contact you and ask: Did you want to start listing shoes for sale? If you said yes, you would pay Amazon a fee. Amazon would send you the addresses of customers who had placed orders on the site all over the United States, and you would be responsible for sending them shoes. Periodically, Amazon would pay you, after taking its cut of what the customers had paid it.

In 2006, a year after introducing its Prime membership for customers, Amazon created a service that would drastically expand the seller population. Fulfillment by Amazon, as it was called, enabled merchants to pay Amazon to warehouse and deliver their goods. By making sellers who used F.B.A. eligible for two-day Prime delivery, Amazon incentivized sellers to sign up.

These third-party sellers deserve a lot of the credit for making Amazon the juggernaut it is. By competing with Amazon’s own retail division, they stocked the Amazon catalog, drove down its prices and subsidized the build-out of its infrastructure, both virtual and physical. It also meant that from the beginning, Amazon’s success was predicated on a degree of ignorance.

Credit…Illustration by Ben Denzer; source photographs by Paul Denzer

Amazon was able to scale up the way it did precisely because it outsourced the work of knowing where to get things. And as it grew, this model insured Amazon against mistakes. If there was not, in fact, demand for X many more of a seller’s shoes per year, that was not Amazon’s problem. It was the seller’s. As long as sellers paid to list and store their goods, Amazon made money, no matter what happened.

If this is news to you, it is because of a big thing that Jeff Bezos got right: standardization. Mr. Bezos considered buying eBay several times. But in order for online shopping to become a mass phenomenon, he bet that it would have to feel less like eBay and more like Costco. People might enjoy checking a website a dozen times per day to haggle over a commemorative Princess Diana Beanie Baby. They did not want to do it every time they needed toilet paper.

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And so, even as Amazon drew more and more third-party sellers to use its services, it created an interface that mostly hid them from view. Even as the company courted multiple suppliers of the same products, it typically presented them to customers under single listings. As time passed and Amazon’s logistics empire grew, more and more purchases began to arrive in standard brown boxes, within standard delivery times of one to two days.

Today, when you go on Amazon to search for, say, a box of crayons and click on the first result, you arrive at what looks like a virtual store shelf. There is a single listing and a set of photos and a default price in the Buy Box. But if you look down, you will often see that the crayons you want are available from several suppliers — from Amazon, the brand, resellers. In fact, such a listing is less like a shelf than a flea market, where everyone is selling the same thing and Amazon owns all the tables and is also the only one who can tell who actually made the sale. Research has shown that a vast majority of customers never do look down.

When you shop on Amazon, you are less likely to be buying something from Amazon than through it. More than 60 percent of physical goods bought on Amazon come from third-party sellers, Mr. Bezos told Congress in 2020. In 2021, industry experts estimated that there were about six million active third-party sellers on Amazon.com and that 3,700 new accounts opened every day, many of them in China. Amazon’s current job listings in Beijing show that it is hiring “seller onboarding associates.” Using F.B.A., manufacturers or private label companies can ship goods directly to Amazon fulfillment centers; Amazon takes care of the rest.

Third-party sellers are a key part of Amazon’s business. A recent report by the Institute for Local Self-Reliance, a think tank critical of Amazon, showed that the fees they pay are Amazon’s fastest-growing major source of revenue: The company pocketed $121 billion in fees from sellers in 2021, up from $60 billion in 2019. Given its market dominance, those fees are a revenue stream that Amazon could most likely turn up. The report also noted that the average seller now gives Amazon a 34 percent cut of every transaction, up from 19 percent in 2014.

On Thursday, Amazon announced a program that will allow some merchants who use its fulfillment services to put a Buy With Prime badge on their own sites; Prime members will be able to buy directly from those merchants while enjoying the perks of Amazon’s logistics empire: speedy delivery and free returns. (How much Amazon will charge the merchants is not yet clear.) In addition to expanding Amazon’s monopolistic power, this move appears to extend its history of strengthening its intermediary position while displacing work and risk onto the third parties whose fees subsidize the build-out of its infrastructure. And it makes questions of liability still more vexing.

There is nothing inherently nefarious about third-party sellers. A majority of them, like a majority of people everywhere, are very likely decent people trying to make a decent living under the circumstances that they have. There is also nothing new about products causing accidents — falling apart, bursting into flames. As any first-year law student taking torts can tell you, things have malfunctioned since approximately forever.

What is new is the way Amazon has interposed itself between sellers and customers. The company leverages its vast market power and troves of data to predict customer demand and sometimes to pressure suppliers. Like Nike in the 1980s, Amazon has created kinds of business relationships that enable it to pass cost and risk down the value chain. Amazon Marketplace takes the logic of outsourcing to its conclusion: Whereas Nike subcontracted just-in-time production of its shoes to scores upon scores of factories, for the third-party goods Amazon stocks from all over the world, it usually doesn’t hold the titles at any point.

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Like other tech firms, Amazon eschews responsibility for the new kinds of interactions that its platform facilitates. There has been much discussion in recent years of the fact that existing laws exempt Google and Facebook and Twitter from liability for user-generated content, even when that content is false or promotes harassment. Amazon has used the same law to argue that it is not responsible for false claims by third parties who sell things on its site. As for fraudulent or dangerous products, the company insists that it is only a channel; in contrast to Walmart, CVS and other brick-and-mortar stores, it should not bear strict liability.

Inviting us to transact with far-flung strangers, Amazon says: Trust us. Several recent developments call into question whether Amazon’s marketplace deserves the trust we place in it. Last May, a breach of a server in China revealed that possibly as many as 75,000 Amazon seller accounts had been buying customer reviews. In 2020, six Amazon consultants were indicted in a Washington State court for having bribed Amazon employees to reinstate suspended seller accounts, facilitate attacks against competitors and provide unauthorized access to internal Amazon data. The first of them to stand trial was sentenced to 10 months in prison in February. (Amazon told The Times that the company referred the defendant to law enforcement, saying, “There is no place for fraud at Amazon.”)

These issues fundamentally undermine the integrity of the marketplace. If you go to Amazon and type “headphones” or “pacifier” in the search bar, you expect that the top results are the best headphones or pacifiers. You feel comfortable buying them from a brand called something like PHZWLA — or, more likely, without looking up the brand at all — because you trust that Amazon has vetted it. You assume that if the headphones sounded tinny or smelled funny, at least a few of the thousands of reviews on the page would have said so. And if these things were really dangerous, if they were going to spark a fire in your ears or come apart and choke your infant in her sleep, that would have happened to someone already and Amazon would have removed them.

But if hundreds of thousands of reviews are routinely being bought and sold and sellers are maintaining many accounts or bribing employees to get reinstated after suspensions, would you feel so sure?

From the seller’s perspective, the prospect that competitors could buy data on their businesses or negative reviews of their goods is a source of constant worry. It also creates incentives to break the rules. If others are buying reviews, you have to. If competitors are bribing Amazon employees, shouldn’t you? If Amazon is using algorithms to abruptly suspend many thousands of accounts, doesn’t it make sense to maintain extra accounts as backup?

I am a professor who studies tech platforms, and when I first read about the case of the toddler who swallowed the battery, I was shocked. Not by the fact that Amazon had avoided strict liability for the child’s injuries but by the fact that it never found the seller. As I read through the case law, I discovered that this was a common theme. Customers who had been hurt or whose children had been hurt by something bought on Amazon frequently filed suit, only to discover that there was no one courts could hold accountable.

In the first weeks of the pandemic, I started to click on seller account names. I came to recognize that a store that had just added N95 masks to a stock of, say, socks and spatulas might not have great masks. I found myself becoming still more circumspect. I stepped gingerly onto our new off-brand step stool. When a foam jigsaw mat that I had ordered for my daughters made our living room smell like ammonia, I boxed it right back up. Amazon gave me a refund.

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Recently, some courts have challenged Amazon’s claim that it is not a seller. In 2020 an appeals court in San Diego found that Amazon was liable for a laptop battery that exploded and gave a woman severe burns. In 2021 another California court determined that Amazon was liable for a toy hoverboard that caught fire and burned a woman. Last July the Consumer Product Safety Commission sued Amazon to force the recall of hazardous products being sold by third parties on its site. The ones it found included 24,000 faulty carbon monoxide detectors, 400,000 hair dryers that lacked immersion protection devices to prevent shock and electrocution and numerous children’s pajamas that did not meet flammable fabric safety standards. Amazon moved to dismiss the case, claiming it served only as a “third-party logistics provider” — like a shopping mall — but in January, an administrative law judge ruled that it was a distributor, like a store, under the Consumer Product Safety Act. (An Amazon representative told The Times, “While we continue to disagree with the notion that we are a distributor, we share C.P.S.C.’s commitment to customer and product safety and will continue working toward that goal.”)

Outside the courts, federal agencies have called for online retailers — including Amazon — to police their marketplaces for fraud, particularly counterfeit and defective goods. And since 2020, legislators from both parties have introduced bills that would compel e-commerce platforms to do more to verify the identities of sellers. Versions of one such bill, the INFORM Consumers Act, have been introduced in 18 state legislatures, with support from lobbyists who represent Walmart and other major retail chains. So far, only Arkansas, Walmart’s home state, has passed one. But this year, a version of the act was included as a section of another bill that passed both houses of Congress and is now in the reconciliation process. Amazon supported the bill after lawmakers incorporated the company’s concerns into the text. An Amazon representative told The Times that the company supports “a federal approach that will avoid imposing inconsistent obligations on sellers.”

Even if Walmart has self-interested reasons for backing the INFORM Consumers Act, it seems difficult to argue with the claim that e-commerce platforms should vet businesses that sell large volumes of products through them or be liable for accidents, just as brick-and-mortar stores typically are. One important element is missing from the act, though: In addition to offering more clarity to customers, Amazon should become more accountable to the sellers who are its customers, too, by offering them clearer ways to dispute automated decisions and fairer terms for arbitration.

The automated processes that Amazon uses to govern its Marketplace at scale will make mistakes; all algorithms do. They will also be gameable; all algorithms are. To small-business owners who depend on Amazon for their livelihood and take on debt to scale, mistaken punishment and unfair gaming can be devastating. If new rules are put in place without clear avenues for appeal, they will motivate sellers to seek workarounds that undermine the marketplace integrity that the bill strives to create.

Amazon does not want to hurt customers. On the contrary, almost everything about Amazon is optimized to please its customers. Like some other retailers, the company often does not even require refunded merchandise to be returned. Amazon did not invent outsourcing or single-handedly create the inequalities that it profits from, any more than Facebook and YouTube invented lying or Uber created the precariousness that motivates many of its drivers to sign up. But as Amazon makes aspects of global exploitation more efficient, its growing monopolistic power means that more and more of commerce operates on its terms. As the broad public has come to recognize of social media, those terms include a great deal of opacity and impunity for platforms.

Narratives of injury engross us because they point to tangible harms — blindings and burns and broken bones. They play to concrete fears and offer individual resolutions. Amazon has every interest in presenting problems in its marketplace as the fault of a few bad actors. So do politicians. It is hard to get constituents excited about cracking down on a company that most of them like and use regularly. It is easier to blame the failures of that company on distant Chinese manufacturers — to point to racialized others who are already objects of animus, rather than to a system that implicates most American adults. But the prospect of injury without relief — a prospect that workers in fulfillment centers face much more frequently than customers — should not make us turn to Amazon for solutions; rather, it should raise the question of whether such cheap, fast consumption is, in fact, desirable.

Bad actors exist. But they are acting within a system that is set up to create them.

Moira Weigel is an assistant professor of communication studies at Northeastern University.

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