Amazon Evades Consumer Protection Law and Increases Consumer Risk

FOR IMMEDIATE RELEASE

Media contact: Stefanie Spear, [email protected], 216-387-1609

Berkeley, California—June 26, 2019—A superior court judge in California recently issued a proposed ruling that would exempt Amazon.com (Amazon) from the responsibility to ensure that products sold on the mega-retailer’s website provide warnings to consumers when those products contain harmful chemicals. The proposed ruling was issued in a case challenging Amazon’s sale of skin-lightening creams containing dangerously high levels of mercury. The case was brought under California’s Safe Drinking Water and Toxic Enforcement Act (Toxic Enforcement Act or Act), commonly referred to as Proposition 65. The proposed ruling must be formally issued to be considered final. 

The proposed ruling is one of many recent court decisions that have created loopholes in state consumer protection laws for a large segment of e-commerce sales allowing Amazon to escape responsibility for products sold by third party vendors. The ruling is particularly alarming as Amazon shifts to forcing its thousands of vendors into selling their products as third-party vendors on the Amazon website.   

This most recent proposed ruling was issued in a case challenging Amazon’s sale of skin-lightening creams containing dangerously high levels of mercury under California’s Safe Drinking Water and Toxic Enforcement Act (Toxic Enforcement Act or Act), commonly referred to as Proposition 65. Skin-lightening products containing dangerous chemicals such as mercury and hydroquinone are already contributing to a public health crisis amongst nonwhite populations as the global cosmetic industry heavily markets the idea that lighter skin is associated with prosperity, privilege and beauty.     

The Toxic Enforcement Act protects consumers by requiring any business with more than 10 employees to warn California residents before selling products that would expose them to known carcinogens or reproductive toxins. This, and other recent rulings, are particularly egregious in failing to recognize the importance of ensuring that e-commerce, which is now reaching tens of millions of people, plays by the same consumer protection rules as brick and mortar stores. Amazon actively recruits and facilitates — and directly profits from — third party sales of toxic products through its online retail platform, and despite the fact that Amazon had been repeatedly notified of the toxic content in a broad range of products, including skin-lightening creams, the proposed judgment held that Amazon bears no legal responsibility to warn its customers. 

Unfortunately for consumers, the proposed ruling would essentially permit retail giants like Amazon.com, eBay, Target, and Walmart to wash their hands of legal responsibility to avoid selling toxic products or inform consumers of toxic exposures under California’s Toxic Enforcement Act. This ruling defies all reasonable expectations, allowing the behemoth retailer to open its doors to toxic products in a way that could never occur in traditional commerce, where toxic products might be sold at a few corner stores but not through major retailers.

The proposed ruling reflects a judicial trend that has allowed retail giants like Amazon to escape compliance for products sold via their websites using inapplicable legal rules. For instance, the federal Communications Decency Act (CDA) provides that online service providers, such as providers of online forums, “shall [not] be treated as publisher or speaker” of information provided by a third party. Amazon is certainly not an “online forum provider” as that term is reasonably interpreted. Yet, in recent years, Amazon and other retailers have successfully argued that the statute provides them immunity from state consumer protection mandates for items sold on their sites, so long as third-party sellers are involved. The CDA, as originally devised, was never intended to grant online retailers such sweeping immunity.

This trend is particularly concerning as Amazon and other mega retailers like Walmart and Target shift their focus to encourage and facilitate third party sales on their websites. The legal rulings allow these companies to facilitate worldwide sales, even ship products out of their own warehouses, but because they don’t take legal ownership of the products they can evade responsibility for meeting state and federal laws binding other retailers. According to Amazon, third party sales now make up nearly 60 percent of the physical gross merchandise sold on Amazon, more than sales of products actually sold directly by Amazon under the Amazon brand. 

Many of the toxic products made by third parties would have no way of reaching consumers but for Amazon’s online services. Amazon actively solicits and participates in sales by third parties, including assisting with creation of product listings; advertising and marketing third party products on its website; processing customer payments; and providing warehousing and shipping fulfillment services for third parties — all the things a retailer normally does. In exchange, Amazon earns fixed fees, a percentage of sales, or some other combination of proceeds from third party sellers. In 2018, these commissions and fees brought in $43 billion for Amazon.

In the context of the ongoing Amazon case, the proposed ruling would allow Amazon.com to continue sale of illegal creams to consumers, despite being sued in 2014 by an individual consumer and again in April of this year in a lawsuit by consumer interest group As You Sow. In both lawsuits, independent testing of skin-lightening creams purchased through Amazon found dangerously high levels of mercury — thousands of times the legal limit set by the U.S. Food and Drug Administration (FDA) — and up to 38,000 times in one skin-care product. With such high levels of mercury, the creams fall within the misbranded and adulterated drugs classification set by the FDA, and are treated as hazardous waste in California. Amazon has continued sale of these toxic creams despite the ongoing litigation and public outcries from consumer interest groups.

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