CPSC Changes Rules for Amazon

On July 29, 2024 the Consumer Product Safety Commission issued a unanimous decision and order categorizing Amazon as a “distributor” under the Consumer Product Safety Act.  This ruling grew out of an ongoing dispute originating with an administrative complaint against Amazon regarding its Fulfilled by Amazon (“FBA”) Program in 2021.  Nearly 400,000 products sought to be sold by Amazon were at issue in the administrative litigation.

As a “distributor,” Amazon would be subject to CPSC regulations, including reporting, recall, mandated refunds, fines and citations. 

“Distributor” v. “Third Party Logistics Provider”

The CPSA defines a “distributor” as “a person to whom a consumer product is delivered or sold for purposes of distribution in commerce, except that such term does not include a manufacturer or retailer of such products.”  U.S.C. § 2052(a)(8).  Further, the CPSA defines “distribute in commerce” as “to sell in commerce, to introduce or deliver for introduction into commerce, or to hold for sale or distribution after introduction into commerce.”  U.S.C. §§ 2052(a)(7). 

On the other hand, a “third-party logistics provider” is defined as “a person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”  U.S.C. § 2052(a)(17). 

In its July 2024 order, the CPSC found that Amazon’s FBA Program fit squarely within its definition of a “distributor,” primarily because of Amazon’s control over the sale and storage of goods processed.  The CPSC found that Amazon warehoused goods to be sold supplied by third-party sellers for subsequent delivery within its FBA Program.  The CPSC’s ruling emphasized Amazon’s control over all facets of the sale within the FBA Program, including screening products for the program, formatting sales information within the program, communicating with customers directly relating to product returns or exchanges and pricing.  The CPSC found specifically that these factors, and others relating to Amazon’s distribution of goods within the FBA Program, required that it be identified as a “distributor.”

Amazon argued that it was a “third-party logistics provider” and not a “distributor” because it did not take title or ownerships in the products sold on the platform as required within the common law understanding of the role of a distributor.  Amazon argued the common law definition should be used to “fill the gap,” as there was ambiguity in the statute’s definition of “distributor.”  Further, Amazon argued it simply holds or otherwise transports a product but does not take title as is required to be categorized a distributor under the CPSA.  The CPSC summarily denied any ambiguity in the statute. 

Amazon has since filed suit for judicial review of the CPSC’s decision in the United States District Court for the District of Maryland arguing the CPSC expanded its jurisdiction with additional remedial requirements in its July 2024 ruling and further arguing Amazon should be classified as a third-party logistics provider.

Loper Bright and Its Impact

In 2024, the United States Supreme Court issued its decision in Loper Bright Enters. v. Raimondo, reducing the deference the district courts are required to accord federal agency interpretation of their own statutes.  Under this new framework of administrative review, Amazon and like distributors may have an opportunity to challenge the CPSC’s designation of them as distributors.  Amazon has cited to Loper Bright in its petition for judicial review.

Moving Forward

The CPSC’s ruling reflects a broader concern regarding consumer safety in the era of e-commerce.  The CPSC’s ruling now requires Amazon, and other online distributors who provide a sales platform as well as warehousing, delivery, and customer service, to do the heavy lifting when it comes to product safety including reporting, recalls, mandated refunds, etc. — responsibilities that have historically fallen to manufacturers and retailers of products within the chain of distribution.