By Jeph Ajobaju, Chief Copy Editor
Amazon has announced plans to pay customers up to $1,000 for products sold by third-party sellers that caused damage or personal injury, three weeks after the United States sued the online retailer to court for selling dangerous products.
Amazon also announced changes to its complaint process for returns and said it will deal with customer satisfaction itself and go after companies afterward if third parties are unresponsive or unwilling to compensate valid claims.
It said the changes begin September 1 for all products sold on its website, per CNN reporting.
Here’s how it works: Customers can contact Amazon’s customer service and they will notify the seller of the problem. If the seller doesn’t respond, Amazon said it will “address the immediate customer concern, bear the cost ourselves, and separately pursue the seller.”
If the seller rejects the claim, Amazon said it might step in to help address the problem and pay up to $1,000 at no cost to the seller.
“This streamlined process will save time, money, and effort for both customers and sellers,” Amazon said about its new “A-to-z Guarantee.” That represents a shift from the current process of having buyers contact sellers directly about problems.
In recent years, CNN recalls, numerous products sold on Amazon have caught consumers’ ire. For example, hoverboards, carbon monoxide detectors and faulty dog collars sold on Amazon have caused problems.
That has sparked a lawsuit, called “Oberdorf v. Amazon,” that questions if the company can be held liable for damages caused by goods sold by third parties.
Amazon (AMZN) insisted that it is not a seller, rather just a marketplace for other sellers.
“If you purchase any of the products or services offered by these businesses or individuals, you are purchasing directly from those third parties, not from Amazon,” according to its conditions of use.
“Amazon does not assume any responsibility or liability for the actions, product, and content of all these and any other third parties.”
Now, to keep some customers satisfied and protect sellers from paying invalid claims, Amazon is assuming some of that liability.
US sues Amazon to court for selling hazardous products
On July 15, the United States Consumer Product Safety Commission (CPSC) sued Amazon to court for selling dangerous products from monoxide detectors that fail alarm to children’s pajamas that could catch fire.
The firm owned by Jeff Bezos was also docked for selling nearly 400,000 hair dryers that could electrocute people if dropped in water, per CNN.
Amazon’s stock has soared 225,233 per cent under Bezos, bringing its market capitalisation up to $1.7 trillion as of February. Bezos himself has enjoyed equally massive gains with a net worth of about $200 billion, according to Bloomberg data.
However, dozens of Amazon’s own products have been reported as dangerous – melting, exploding or even bursting into flames. Many are still on the market.
CNN reports that the lawsuit is another sign of a far more aggressive stance by the CPSC this year. In the past, the agency has often pulled its punches rather than push a court fight with companies it believes sell dangerous products.
The products cited are not sold directly by Amazon (AMZN) – they’re sold by third parties using Amazon’s platform.
Many of those companies that sold the dangerous products cited by CPSC are foreign, and the CPSC has limited ability to force a recall of their products if they are found to be hazardous.
The CPSC said cracking down on Amazon is the only way to keep consumers safe from these products.
Third-party sellers account for more than half the physical goods sold on Amazon. The company collected $80 billion in commissions and other payments by third-party sellers last year.
The complaint concedes that Amazon did stop selling the products when notified by CPSC staff, and that it notified buyers of the products of the hazard and offered them cash refunds.
But the complaint says “Amazon’s unilateral actions are insufficient to remediate the hazards posed by the … products.”
The CPSC wants to force Amazon to stop selling the products in question, to work with CPSC staff on a recall of the products and to directly notify consumers who purchased them about the recall and offer them a full refund.
EU fines Amazon historic $887m over privacy law violation
On July 27, Amazon was fined a historic €746 million (about $887 million) after a European Union (EU) data privacy regulator ruled it had violated EU privacy law.
The EU said the General Data Protection Regulation (GDPR) was violated in a decision related to advertising, and it imposed on Amazon the largest fine in the three-year history of signature law, followed by Google’s 2019 fine of €50 million.
CNN reports that the fine was imposed on July 16 and disclosed on July 27 in a financial filing.
Regulators said Amazon’s processing of personal data didn’t comply with GDPR requirements, and the company acknowledged it has been ordered to change its business practices.
Amazon said the regulatory decision was “without merit” and added that it plans to “defend ourselves vigorously in this matter.
“The decision relating to how we show customers relevant advertising relies on subjective and untested interpretations of European privacy law, and the proposed fine is entirely out of proportion with even that interpretation,” per CNN.
The penalty for the alleged violation was imposed by data regulators in Luxembourg, where Amazon has its European headquarters.
The fine marks the latest example of European regulators zeroing in on Big Tech.
Amazon, Google under probe for failing to remove fake product reviews
It was announced on June 25 that Amazon and Google, part of tech behemoth now incurring the ire and the searchlight of American lawmakers, are also being investigated by British regulators over alleged breach of consumer protection law.
Critics charge they are not doing enough to protect shoppers from fake product reviews.
The probe is the latest in a string of investigations piling up against tech giants around the world, as officials and policymakers scrutinize claims of anti-competitive behavior, according to CNN.
The investigations could result in hefty fines and increase pressure on companies including Facebook (FB) and Apple (AAPL) to change the way they do business.
The UK Competition and Markets Authority (CMA) said its formal inquiry, which builds on a preliminary probe launched last May, could force Amazon (AMZN) and Google (GOOGL) to change the way they deal with fake reviews or result in court action.
Fake reviews mislead shoppers
“Our worry is that millions of online shoppers could be misled by reading fake reviews and then spending their money based on those recommendations,” CMA chief executive Andrea Coscelli said.
“Equally, it’s simply not fair if some businesses can fake 5-star reviews to give their products or services the most prominence, while law-abiding businesses lose out.”
An investigation earlier this year by UK consumer group Which? discovered a thriving industry of businesses making money by manipulating reviews on Amazon’s marketplace.
One company had 62,000 reviewers globally – including 20,000 based in the United Kingdom – and would sell individual reviews for £13 ($18) or in bulk packages starting at £620 ($863) for 50 reviews.
Amazon and Google said they would cooperate with the CMA inquiry.