business news in context, analysis with attitude

Last week we took note of a Financial Times report that Amazon went before the Texas Supreme Court to maintain that it isn't"realistic" to expect it to vet all the products sold on its platform, and should not be responsible if items sold on the site hurt the people who buy them.

According to FT, "The court will determine whether Amazon should be considered liable after a 19-month-old child was left severely injured when she ingested a lithium battery from a remote control sold by a Chinese seller on the platform, which the plaintiffs argued failed to meet industry safety standards. In this case and others, Amazon has argued it is a middleman between the millions of third-party sellers on its site and the consumers who buy products."

I commented:

Not a lawyer, so my ability to make a legal judgment about responsibility in such cases is severely limited.

But I've long believed - and have stated here - that retailers ought to be responsible for the things they sell.

Amazon's argument seems to be that it is too vast with too many vendors and third-party marketers to be able to held responsible.  But that doesn't seem to be entirely fair … if you are going to tout yourself as the "everything store," it follows that you have to embrace the positives and negatives of that position.  You can't just pick and choose.  (Well, you can try…)

In the end, I'd argue, it actually is good business - and essentially customer-centric - for Amazon is embrace these responsibilities, despite the cost.  It inspires confidence.  Playing pass-the-buck does not.

Got lots of responses to this story and commentary.

MNB reader Chris Hansen wrote:

Most retailers take a very similar position when products result in injury claims. The supplier vetting process typically includes a review of the supplier’s financial strength, a requirement that the supplier indemnify the retailer for product liability, and a requirement that the supplier maintain adequate product liability insurance naming the retailer as an additional insured on the policy.  When product claims arise, the retailer directs the customer to the supplier (in a nice way) keeping pressure on the supplier to resolve the matter.  If things turn ugly and the retailer is named in a suit, it has legal protection from the indemnity agreement and financial protection from the supplier’s insurance policy. This risk transfer technique has been effectively used for many years.  

I suppose the distinction Amazon is making is that they are even more removed from the customer transaction because they are simply a marketplace and not an actual retailer, like a flea market with many vendors under one tent. 

Another MNB reader wrote:

If Amazon were to require “hold harmless’ guarantees from their many suppliers one of two things would happen:  The sellers would do it thus getting Amazon off the hook or the sellers (many in China) would agree but then not do it putting Amazon on the hook.  It is more interesting that Amazon does  not have the guarantees.  I think that many of the sellers on Amazon are not legal entities and would fold their tents with any problem.  Amazon’s position of just offering a platform is similar to a building owner saying he is not responsible that the business conducted in his building is prostitution.  That the US does not have standards like most other countries is an open invitation to injuries such as described.  The US enforces quality with lawsuits but try suing a foreign supplier.

MNB reader Eric Williams wrote:

As a long time reader I really like your pieces and appreciate your comments about the liability of businesses regarding the products that they sell.  I tend to agree with your point that they should; however, this is a slippery slope.  If we put this into the context of the world you and I know well, Grocery, should a grocery store be responsible for the lettuce that they sell if it happens to contain listeria and some number of people die.  The store did not grow the lettuce, they did not truck it to the warehouse, etc.  They took ownership and had an expectation that the grower and packer followed all of the Federal/State requirements. When do you say that businesses should or should not be responsible for the products that they sell?

I don’t know either.

MNB reader Tim McGuire wrote:

While I am sympathetic to the argument that Amazon should be held responsible for quality and safety of products sold on their marketplace, I’m not sure it can be done.  If I was an Amazon lawyer, I would argue that Amazon is effectively an online shopping mall landlord, renting (virtual) store space to retail “tenants”.  Do we hold Simon Properties or other mall operators liable for the quality and safety of the products sold by retail tenants in their malls?  If not, how can Amazon (or any other marketplace operator) be held to a different standard?  

MNB reader Rich Heiland wrote:

My membership is with Amazon Prime. I shop on the Amazon web site. I pay zero attention to who is providing the actual product. While Amazon may view itself as the facilitator of transactions I would argue it has worked very hard to establish itself as, in fact, a dominant retailer. If I walk into Walmart and buy a product I don't like, does Walmart duck responsibility? 

MNB reader Dave Wendland wrote:

I found this discussion especially interesting, Kevin. Although I agree that there is “responsibility” on the part of any retailer to vet its partners and suppliers, however, it is my opinion that accountability and liability is the manufacturer’s domain. It’s a very slippery slope if Amazon becomes the target of such litigation … the snowball effect will become overwhelming and change the face of the retailer’s role (which I tend to side with Amazon on – they are the middleman facilitating an exchange of goods).

Seems to be a very spirited debate and it will be interesting to see which side the courts land on.

And from another reader:

So their defense is: we are too big to fail. Where have we heard that before…?

Interesting debate.  I'm just glad we're talking about something other than the pandemic.

There also was a story from Axios last week that "there's a growing push among federal lawmakers for a road user fee to fund highway repairs," a move that conceivably increase costs for any business the depends on trucks for interstate transportation.

You know, like the supermarket industry.  Or any national retailer.  Or shipping business.  Or national retailer that also happens to be in the shipping business.

Here's how it might work:  "A vehicle-miles-traveled (VMT) system … would charge drivers a penny or two for each mile logged behind the wheel.Drivers would report their mileage electronically, using a plug-in device in their cars or a smartphone app."

One MNB reader responded:

In many parts of the country this is the purpose of a toll road or turnpike. We take a turnpike as we drive through parts of Kansas, for a fee you get rest areas with clean bathrooms, gas and food. You don't have to slow down for towns and it is at least 4 lanes. In parts of Oklahoma the same, in other parts of Oklahoma you come upon a toll booth that has no rhyme or reason but there it is you pay the toll and keep on driving.

I am sure the Feds will come up with some way to exact a tax to pay for infrastructure. Just one more consequence of one advancement having ripples that maybe no one considered at the time. Time to stop making buggy whips and start working on the next thing.

From another MNB reader:

Pay as you go may not truly work if you begin to ask all electric car owners to start logging miles.  Something simpler, pay as you charge instead.  Meter the charging stations that charge the vehicle.  The meter would be available on a commercial and residential scale.  I wonder how loud the “Green Heads” would yell when they now have to pay for clean air.

I've driven cross country a number of times, from Connecticut to the Pacific Northwest, and one of the things that amazed me was that I didn't run into any tolls west of Illinois.  And I did find myself wondering how they were paying for the roads, and would pay for inevitable repairs and replacement in the future.

The thing about tolls is, they can avoided in a lot of places.  A tax based on actual miles driven might actually be fairer.

But I'm open to suggestions to the contrary.

But one MNB reader isn't buying:

Just one more way for the Government to track where we go.

I recommended the Australian movie Rams last Friday, which led MNB reader David Carlson to write:

If you enjoyed the Australian remake, the Icelandic original from 2015 is also worth a look.

I'll keep it in mind.

My wine of the week last Friday was the 2019 Il Pumo Primitivo, a red wine from Salento, in Southern Italy, from the Cantine San Marzano winery.

MNB reader Carl Jorgensen offered much more context than I did:

Another great southern Italian wine recommendation! It’s one of our favorites, and has an interesting history.

According to Wikipedia, “Primitivo probably arrived to Puglia from the coastal vineyards of Croatia (just across the Adriatic Sea), where it is still grown today, under various tongue-twisting names including Tribidrag and Crljenak Kasteljanski. In the early 19th Century, the variety was introduced to the United States, under the name Zinfandel. It proved extremely successful there, earning a reputation as the American 'national grape'. It caused significant consternation on both sides of the Atlantic when DNA analysis proved that Zinfandel and Primitivo were the same variety.”

It's what I love about MNB.  Every day I learn something.