Online marketplaces have transformed e-commerce by allowing third-party sellers, who are independent merchants, to reach global audiences through the online marketplace’s platform. Some products from third-party sellers on online marketplace, such as the products described in the Transatlantic Consumer Dialogue report Unsafe and Online, may not meet mandatory safety standards. Unfortunately, enforcement from U.S. authorities can be challenging when foreign third-party sellers are involved.
Consumers may also face difficulties getting recourse when harmed by a defective product from third-party sellers on online marketplaces. These challenges are further compounded by state approaches to online marketplaces and product liability, which take varied approaches to holding marketplaces accountable, leaving many consumers in limbo when faced with unforeseen harm. The Consumer Federation of America implores policymakers at the state and federal level to address online marketplace accountability. Online marketplaces should be responsible for products sold on their platform.
Product Safety and Online Marketplace at the Federal Level
At the federal level, the United States faces significant challenges in regulating product safety across online marketplaces, largely due to outdated laws that predate the e-commerce boom and jurisdictional complexities involving international sellers. The Consumer Product Safety Commission (CPSC), while tasked with enforcing safety standards, operates under statutes designed for traditional retail models and lacks the mandate to effectively address online marketplace accountability. Further, the agency must deal with identifying unsafe products among vast amounts of products while also dealing with sellers who may be located overseas and find it difficult to hold them accountable. This can lead to gaps in which dangerous or non-compliant products can enter the U.S. and our homes through online marketplaces with minimal oversight.
How Different States Handle Online Marketplace Liability
In the absence of comprehensive federal legislation governing online marketplace accountability, states have taken a variety of approaches. This leaves consumers in an unbalanced spectrum of equity: few consumers have the right to seek damages for defective products, while many suffer unexpected harm without recourse simply because they live in a State without broad online marketplace accountability. Online marketplaces, nevertheless, qualify themselves as “hosts” of a transaction, despite independently storing and shipping goods to consumers.
Traditional Immunity States
Many states continue to rely on existing product liability frameworks that generally shield online marketplaces from responsibility for third-party seller products. For example, courts in Minnesota, Arizona, and Texas declined to extend liability to online marketplaces because marketplaces offering third-party products for sale do not have sufficient control over products and therefore, do not qualify as a “seller” of the product.
Leading the Charge
State courts in California, New York, and Wisconsin have held Amazon responsible for defective third-party products. In Bolger v. Amazon, Bolger sued Amazon under strict product liability for a defective laptop battery that exploded and caused severe burns. Amazon evaded liability, arguing that they were not a “seller” of the defective battery. The court held that Amazon can be strictly liable because it played a significant role in the product’s sale and distribution under the following factors: (1) Amazon received payment and took its commission out of selling the defective battery; (2) Amazon stored, packaged, and shipped the battery directly to Bolger; (3) the sale occurred on Amazon’s online platform; (4) Amazon’s A-to-Z Guarantee created a consumer impression that Amazon was responsible for the product’s sale.
Emerging Models
A few states, including California, Illinois, New York, and Nebraska, have explored the implementation of product liability to extend liability in defective products to online marketplaces, to ensure accountability in marketplaces where consumers can garner trust. In 2020 and 2021, California introduced AB 3262 and AB 1182, to hold online marketplaces strictly liable for defective products sold through their platforms. However, the bills failed in committee.
In 2024, New York introduced S6437 to classify online marketplaces as retailers. The bill has been referred to the judiciary committee, where it currently remains inactive. In 2025, Illinois introduced SB 1671 to extend product liability to online marketplaces that receive goods from third-party sellers outside of the U.S., to be held jointly and severally liable. SB 1671 was referred to the Senate Assignments with no further action. Nebraska’s Apparent Manufacturer Doctrine, which states “One who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer,” can extend to online marketplaces should a bill be introduced to legislators.
The Impact on Consumers
The varied approach across the states and introduced bills shows that there is a clear concern for consumers, especially with the advancement of today’s technology, to seek recourse for defective products that could pose lifelong injuries or even result in death. Consumers deserve consistency, accountability, and safety, regardless of where they live or who fulfills their order.