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E-Commerce Liability Cases Could Open Floodgates For Lawsuits, Panelists Agree

Amazon is entangled in local legal cases that could set off lawsuits for third-party products sold on its platform.

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Nathan Garnett, general counsel at OfferUP, at the ITIF event

May 27, 2021—Emerging legal rulings holding online retailers liable for defective third-party products could cause a ripple effect of lawsuits if more courts across the nation adopt that position, according to a panel of legal experts at an event hosted by the Information Technology & Innovation Foundation on Wednesday.

Product liability law has traditionally held that the “seller” of products are responsible for the defects those products may have. You buy a curling iron from Target, for instance, not directly from Dyson. Target is the seller, and in the case of product defection, Target may be the responsible party.

But Amazon has avoided the legal distinction of seller until recently by arguing that they merely act as the middleman in transactions, and that when items are purchased from its website, business is done directly with the manufacturer, which would be responsible in any legal proceeding. Some have argued that this insulation from liability has made e-commerce companies like Amazon far too powerful.

But two rulings in California and one outstanding case in Texas are challenging that assumption.

Bolger v. Amazon

In one of the California cases challenging the precedent, Angela Bolger bought a laptop computer battery from Amazon.com. The listing for the battery identified the seller as “E-Life,” a company that doesn’t actually exist (Lenoge is the technical company, which wasn’t listed). Several months after the purchase, Bolger was severely burned when the battery she ordered exploded.

In an appeal, Bolger’s lawyers argued that because the package passed through an Amazon-branded warehouse, was prepared for shipment in Amazon-branded packaging, and then sent to Bolger, Amazon is classified as a distributor of the product. Amazon placed itself between Lenoge and Bolger in the chain of distribution, which, according to her lawyers, should make them a responsible party. And the jury agreed.

Loomis v. Amazon

In the second California case, the trials court sided with Amazon when the plaintiff filed suit for sustained injuries stemming from a defective hoverboard, which she purchased from a third-party seller off of Amazon’s website. The Court of Appeal reversed the trial court’s ruling, however, applying the Bolger ruling and confirming that the ruling properly applied strict product liability law to the facts of its case, and was therefore correctly decided.

McMillan v. Amazon 

McMillan v. Amazon.com is currently being heard by the Texas Supreme Court—the first time this legal precedent has crossed state boundaries. Robinson believes that the precedent crossing state lines could be a sign of a shift in legal attitude toward online retailers nationwide.

Taken together — if the Texas court rules similarly to the California cases — a trend may emerge in which other states follow suit and label Amazon a seller, holding them liable in intermediary liability cases.

“I’m not exaggerating when I say this is probably the most important product liability issue that’s arisen in the past 50 years,” said Jeremy Robinson, a partner at law firm Casey Gerry.

Potential problems

While all of the panelists present at the event said they could understand the legal rationale distinguishing Amazon as a seller, some saw brewing legal storms underneath, such as how the law would be applied to other online retailers like eBay and Etsy.

“When you buy a product off Amazon you don’t interact with the third-party seller, you interact with Amazon,” Robinson says, “and all of these things basically make Amazon a retailer. So, Amazon should take the responsibilities of being a retailer, as well as the benefits—and obviously they’re getting a lot of benefits.”

“Where do you draw the line?” Robinson later asked.

Other ecommerce websites like eBay and Etsy have a more direct relationship between sellers and buyers. Amazon may be an easy target because Amazon doesn’t always make it clear who exactly you’re doing business with, but that doesn’t mean that other online marketplaces will remain exempt from the liability protections they have previously enjoyed.

Social Media

Americans Should Look to Filtration Software to Block Harmful Content from View, Event Hears

One professor said it is the only way to solve the harmful content problem without encroaching on free speech rights.

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Photo of Adam Neufeld of Anti-Defamation League, Steve Delbianco of NetChoice, Barak Richman of Duke University, Shannon McGregor of University of North Carolina (left to right)

WASHINGTON, July 21, 2022 – Researchers at an Internet Governance Forum event Thursday recommended the use of third-party software that filters out harmful content on the internet, in an effort to combat what they say are social media algorithms that feed them content they don’t want to see.

Users of social media sites often don’t know what algorithms are filtering the information they consume, said Steve DelBianco, CEO of NetChoice, a trade association that represents the technology industry. Most algorithms function to maximize user engagement by manipulating their emotions, which is particularly worrisome, he said.

But third-party software, such as Sightengine and Amazon’s Rekognition – which moderate what users see by bypassing images and videos that the user selects as objectionable – could act in place of other solutions to tackle disinformation and hate speech, said Barak Richman, professor of law and business at Duke University.

Richman argued that this “middleware technology” is the only way to solve this universal problem without encroaching on free speech rights. He suggested Americans in these technologies – that would be supported by popular platforms including Facebook, Google, and TikTok – to create the buffer between harmful algorithms and the user.

Such technologies already exist in limited applications that offer less personalization and accuracy in filtering, said Richman. But the market demand needs to increase to support innovation and expansion in this area.

Americans across party lines believe that there is a problem with disinformation and hate speech, but disagree on the solution, added fellow panelist Shannon McGregor, senior researcher at the Center for Information, Technology, and Public Life at the University of North Carolina.

The conversation comes as debate continues regarding Section 230, a provision in the Communications Decency Act that protects technology platforms from being liable for content their users post. Some say Section 230 only protects “neutral platforms,” while others claim it allows powerful companies to ignore user harm. Experts in the space disagree on the responsibility of tech companies to moderate content on their platforms.

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Big Tech

Surveillance Capitalism a Symptom of Web-Dependent Companies, Not Ownership

Former Google executive Richard Whitt critiqued Ben Tarnoff’s argument in ‘Internet for the People’ during Gigabit Libraries discussion.

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Photo of Ben Tarnoff, co-founder of magazine Logic and the author of “Internet for the People”

July 15, 2022 – A former Google executive  pushed back against a claim that the privatization of broadband infrastructure has created the world’s current data and privacy concerns, instead suggesting that it’s the companies that rely on the web that have helped fuel the problem.

Richard Whitt, president of technology non-profit GLIA Foundation and former employee of Google, argued that while the World Wide Web is rife with problems, the internet infrastructure underlying the web remains fundamentally sound.

Whitt was responding to claims made by Ben Tarnoff, a journalist and founder of Logic Magazine, at the Libraries in Response event on July 8. Tarnoff argued – as he does in his recent book, “Internet for the People” – that the privatization of broadband infrastructure in the 1990s has allowed the use and commodification of personal data for profit to flourish (known as surveillance capitalism).

The discussion took place during the Gigabit Libraries Network’s series “Libraries in Response.” The session was titled “If the Internet is Broken, How Can Libraries Help Fix it?”

Privatization, Tarnoff claims, has raised such issues as polarization of ideologies and the “annihilation of our privacy.” As a result, he said, the American people are losing trust in tech companies that “rule the internet.”

Whitt responded that the internet is working well based on the protocols, standardized rules for routing and addressing packets of data to travel across networks, derived at the onset of the internet.

The World Wide Web, a system built on the internet to allow communication using easy-to-understand graphical user interfaces, allowed for browsers and other applications to emerge, which have since perpetuated surveillance capitalism into the governing approach of the web that it is today, said Whitt, suggesting it’s not ownership of the hard infrastructure that’s the problem.

The advertising market that encourages surveillance extraction, analysis and manipulation is, and will continue to be, profitable, Whitt continued.

The discussion follows a Pew Research Center study that found that only half of Americans believe tech companies have a positive effect in 2019 compared to a seventy-one percent in 2015.

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Big Tech

American Innovation and Choice Online Act Has Panelists Divided on Small Business Impact

The bill is intended to prohibit product preferences on tech platforms, with some saying it could harm small companies dependent on those platforms.

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Panel at CSIS event on Thursday

WASHINGTON, July 6, 2022 – Observers are still divided about the effect on small business of legislation that is intended to keep large technology platforms from giving preference to their own products over others.

The Center for Strategic and International Studies hosted experts last month to discuss the American Innovation and Choice Online Act, which was introduced in January. The event heard both support for the bill, as well as concern that it could negatively impact smaller businesses that rely on the larger platforms.

“Existing antitrust law is not going to be enough to rein in the power of the largest tech platforms,” Charlotte Slaiman, competition policy director at public interest group Public Knowledge, said, adding the AICOA is very important for small business competition “to get a fair shot.”

“Fundamentally this is a really important…for competition because this protects small companies that are potential competitors against one of these large platforms,” she added.

Krisztian Katona, vice president of global competition and regulatory policy at the Computer & Communications Industry Association, however, said that after performing a cost-benefit analysis of AICOA, he expects the legislation will hurt business competition.

He said that the legislation would increase operating costs for smaller companies and force these companies to reduce the cost of their services. He predicts that close to 100 companies by 2030 would be negatively impacted by the legislation if it becomes law.

Others agree with Katona. A report in March by the Small Business and Entrepreneurship Council said small business owners felt the AICOA could be detrimental to them, saying it could increase prices. Meanwhile Michael Petricone, senior vice president of the Consumer Technology Association, said in June that small businesses would be affected the most by big tech regulation because they depend on those platforms.

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