Amazon To Compensate Customers Upto $1000 Each For Hazardous Products Sold By Its Merchants

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Amazon will pay compensation directly to customers who have been affected by unsafe products sold by independent sellers. Amazon has been facing huge criticism which has resulted in mounting pressure regarding the safety of its goods.

The eCommerce behemoth announced that it will compensate personal injury and property damage for claims up to $1,000 starting September 1. It is important to mention that such cases represented “more than 80%” of cases recorded by Amazon.

“We may step in to cover claims for higher amounts if it found that a claim is valid but the sellers are unresponsive or reject it”, says Amazon.

Amazon Compensation To Customers: Big Picture

  • Third-party sellers account for more than half of products sold by Amazon. Hence, such a move by the eCommerce giant becomes much more significant.
  • The startegy to allow third-party sellers has helped Amazon to list a wider range of products on the shopping platform, but it comes with its own set of challenges. It presents more risk since the products are not pre-vetted by Amazon and rely on the sole discretion of sellers.
  • Many of these sellers use Amazon’s in-house logistics network for storing, packing, and delivering products to their customers. Sellers can list their products on Amazon and have other companies such as FedEx or UPS handle shipping.
  • The decision to protest the interest of customers is made after Amazon was sued last month by the US Consumer Product Safety Commission (a federal agency) which forced the eCommerce giant to recall hundreds of thousands of products that were hazardous to people.
  • According to the CPSC, Amazon must “accept responsibility” for products that could cause serious injury or death. These included hairdryers that were not sufficiently protected against electric shocks, defective carbon monoxide detectors, and child’s bathrobes that did not meet flammability requirements.
  • Amazon claimed that it had already removed most of the incriminated products.
  • Amazon’s new rules state that claims will be reviewed by advanced fraud and abuse detection systems that are complemented by independent, external insurance fraud experts. It stated that frivolous claims will be rejected, claiming that its system would help save time and money in investigating claims.
  • The policy change is in direct conflict with the earlier stand of Amazon in the court of law. Earlier this year the company had admitted that it could not guarantee safety for products sold on its marketplace. It told Texas’s highest court that checking each and every product within its logistics is a completely unrealistic thought.
  • The case concerned a 19-month old child who suffered severe injuries after inhaling a lithium battery sold on Amazon by a Chinese seller. Amazon maintained that it was a middleman in the transaction, and therefore should not be held liable. The Texas Supreme Court disagreed with this position, finding Amazon not to be liable.
  • The ruling reminds us of a similar verdict delivered by an Indian court in 2008 against, an Indian eCommerce platform, holding it responsible for products, claims, and content available on the platform.
  • In Amazon’s case, California judges have rejected Amazon in precedent-setting cases. They ruled that Amazon could be held liable for third-party sales in the same manner as bricks-and-mortar retailers.
  • Recent consumer disputes have resulted in a decision in favor of the consumers. These include a woman who was blinded by a defective dog leash and a woman who sustained third-degree burns from a defective laptop battery.

Food For Thought

Amazon stated in a blog post that it stands behind customers and products, no matter who sells them. The company also believes that with such a protection policy in place it is leaving no stone unturned and acting much more than any other marketplace service to protect customers.

It would definetly help Amazon to win the trust of online shoppers. However, such policy is going to cost dearly to Amazon, especially when the company is already struggling to deal with sellers who are listing sub-standard products and manipulating reviews and ratings by excercising unethical practices. It would be interesting to see how the eCommerce market leadre will stricke out a perfect balance between sellers and customers expectations in the months to come.

Amazon stated that the policy change only affected the United States first, but would soon be extended to other countries.


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