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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.

Reporter Tyler Perkins studied rhetoric and English literature, and also economics and mathematics, at the University of Utah. Although he grew up in and never left the West (both Oregon and Utah) until recently, he intends to study law and build a career on the East Coast. In his free time, he enjoys reading excellent literature and playing poor golf.

Section 230

Repealing Section 230 Would be Harmful to the Internet As We Know It, Experts Agree

While some advocate for a tightening of language, other experts believe Section 230 should not be touched.

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Rep. Ken Buck, R-Colo., speaking on the floor of the House

WASHINGTON, September 17, 2021—Republican representative from Colorado Ken Buck advocated for legislators to “tighten up” the language of Section 230 while preserving the “spirit of the internet” and enhancing competition.

There is common ground in supporting efforts to minimize speech advocating for imminent harm, said Buck, even though he noted that Republican and Democratic critics tend to approach the issue of changing Section 230 from vastly different directions

“Nobody wants a terrorist organization recruiting on the internet or an organization that is calling for violent actions to have access to Facebook,” Buck said. He followed up that statement, however, by stating that the most effective way to combat “bad speech is with good speech” and not by censoring “what one person considers bad speech.”

Antitrust not necessarily the best means to improve competition policy

For companies that are not technically in violation of antitrust policies, improving competition though other means would have to be the answer, said Buck. He pointed to Parler as a social media platform that is an appropriate alternative to Twitter.

Though some Twitter users did flock to Parler, particularly during and around the 2020 election, the newer social media company has a reputation for allowing objectionable content that would otherwise be unable to thrive on social media.

Buck also set himself apart from some of his fellow Republicans—including Donald Trump—by clarifying that he does not want to repeal Section 230.

“I think that repealing Section 230 is a mistake,” he said, “If you repeal section 230 there will be a slew of lawsuits.” Buck explained that without the protections afforded by Section 230, big companies will likely find a way to sufficiently address these lawsuits and the only entities that will be harmed will be the alternative platforms that were meant to serve as competition.

More content moderation needed

Daphne Keller of the Stanford Cyber Policy Center argued that it is in the best interest of social media platforms to enact various forms of content moderation, and address speech that may be legal but objectionable.

“If platforms just hosted everything that users wanted to say online, or even everything that’s legal to say—everything that the First Amendment permits—you would get this sort of cesspool or mosh pit of online speech that most people don’t actually want to see,” she said. “Users would run away and advertisers would run away and we wouldn’t have functioning platforms for civic discourse.”

Even companies like Parler and Gab—which pride themselves on being unyielding bastions of free speech—have begun to engage in content moderation.

“There’s not really a left right divide on whether that’s a good idea, because nobody actually wants nothing but porn and bullying and pro-anorexia content and other dangerous or garbage content all the time on the internet.”

She explained that this is a double-edged sword, because while consumers seem to value some level of moderation, companies moderating their platforms have a huge amount of influence over what their consumers see and say.

What problems do critics of Section 230 want addressed?

Internet Association President and CEO Dane Snowden stated that most of the problems surrounding the Section 230 discussion boil down to a fundamental disagreement over the problems that legislators are trying to solve.

Changing the language of Section 230 would impact not just the tech industry: “[Section 230] impacts ISPs, libraries, and universities,” he said, “Things like self-publishing, crowdsourcing, Wikipedia, how-to videos—all those things are impacted by any kind of significant neutering of Section 230.”

Section 230 was created to give users the ability and security to create content online without fear of legal reprisals, he said.

Another significant supporter of the status quo was Chamber of Progress CEO Adam Kovacevich.

“I don’t think Section 230 needs to be fixed. I think it needs [a better] publicist.” Kovacevich stated that policymakers need to gain a better appreciation for Section 230, “If you took away 230 You would have you’d give companies two bad options: either turn into Disneyland or turn into a wasteland.”

“Either turn into a very highly curated experience where only certain people have the ability to post content, or turn into a wasteland where essentially anything goes because a company fears legal liability,” Kovacevich said.

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Big Tech

Amy Klobuchar Reiterates Need for Funding Agencies to Handle Big Tech

‘These companies know how many resources they [agencies] have,’ Klobuchar said.

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Senator Amy Klobuchar, D-Minnesota

WASHINGTON, September 16, 2021 – At a virtual conference hosted by Politico on Wednesday, Amy Klobuchar, D-Minnesota, repeated what she sees as a need to equip federal agencies with adequate resources to deal with privacy issues related to Big Tech – even as it battles on parallel issues like antitrust.

Klobuchar and Sen. Chuck Grassley, R-Iowa, introduced bipartisan legislation in May that would “ensure that antitrust authorities have the resources they need to protect consumers.” The Democrats also introduced funding avenues in their reconciliation bill for the Federal Trade Commission to tackle the myriad of issues related to Big Tech, including data privacy concerns and big mergers.

“It is a major priority and has been of mine to get privacy money into the FTC,” Klobuchar said Wednesday. “That should not come at the expense of the major case they just refiled against Facebook and the antitrust work that has to be done.

Last month, the FTC, under chair Lina Khan, filed an amended complaint against Facebook for alleged anticompetitive behavior, arguing that Facebook “holds monopoly power” and engaged in “anticompetitive acquisitions.”

And earlier this month, four members of Congress asked the Department of Justice to dig into allegations that Facebook and Google colluded to ensure that neither hindered each other’s performance in the digital advertising space, which both combined dominate.

“These companies know how many resources they [agencies] have,” Klobuchar added. “We’re in a merger mania right now, both with the DOJ antitrust and the FTC. And they even in the past had to pause some of their review of mergers because of resource issues. And they can’t just take on all tech and not do anything else when it comes to antitrust, and that’s why I’m such a big believer that we must better fund that part of both of these agencies or we are going to make a mockery of our antitrust laws.”

Klobuchar also said the big technology companies have also put up resistance to calls for national privacy legislation, and only came around when the states began implementing their own rules. She noted that they don’t want a “patchwork quilt” of different laws, which would make it too complex to follow.

Klobuchar’s track record

Klobuchar has introduced, and has supported, a number of bills that would target big technology companies. In July, she introduced a bill that would remove Section 230 liability protections from social media platforms if they allow misinformation on vaccines to permeate. She also helped introduce legislation that would amend Section 230 to hold companies accountable for information on their platform that they get paid for.

Klobuchar was among three Democratic lawmakers who also introduced legislation that would ban app store operators from requiring app providers to use their in-app payment systems. That was before a U.S. district judge handed down a judgment that found Apple committed no anticompetition violations against the giant, after it banned Epic Games’ Fortnite from its app store because it circumvented the app store’s fees.

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Social Media

Members of Congress Request Facebook Halt ‘Instagram For Kids’ Plan Following Mental Health Research Report

Letter follows Wall Street Journal story that reports Facebook knew about mental health damage Instagram has on teens.

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WASHINGTON, September 15, 2021 – Members of Congress have sent a letter Wednesday to Facebook CEO Mark Zuckerberg urging the company to stop its plan to launch a new platform for kids, following a report by the Wall Street Journal that cites company documents that reportedly shows the company knows its platforms harm the mental health of teens.

The letter, signed by Edward Markey, D-Massachusetts, Kathy Castor, D-Florida, and Lori Trahan, D-Massachusetts, also asks Facebook to provide answers by October 6 to questions including whether the company has, and who, reviewed the mental health research as cited in the Journal report; whether the company will agree to abandon plans to launch a new platform for children or teens; and when the company will begin studying its platforms’ impact on the kids’ mental health.

The letter also demands an update on the company’s plans for new products targeting children or teens, asks for copies of internal research regarding the mental health of this demographic, and copies of any external research the company has commissioned or accessed related to this matter.

The letter cites the Journal’s September 14 story, which reports that the company has spent the past three years conducting studies into how photo-sharing app Instagram, which Facebook owns, affects millions of young users, and found that the app is “harmful for a sizable percentage of them, most notably teenage girls.” The story uses the story of a teen who had to see a therapist due to an eating disorder due to exposure to images of other users’ bodies.

The story also cites a presentation that said teens were blaming Instagram for anxiety, depression, and the desire to kill themselves.

The head of Instagram, Adam Mosseri, told the Journal that research on mental health was valuable and that Facebook was late to realizing the drawback of connecting large swatch of people, according to the story. But he added that there’s “a lot of good that comes with what we do.”

Facebook told Congress it was planning ‘Instagram for kids’

Back in March, during a congressional hearing about Big Tech’s influence, Zuckerberg said Instagram was in the planning stages of building an “Instagram for kids.” Instagram itself does not allow kids under 13 to use the app.

On April 5, Markey, Castor and Trahan penned their names on another letter to Zuckerberg, which expressed concerns about the plan. “Children are a uniquely vulnerable population online, and images of kids are highly sensitive data,” the April letter said. “Facebook has an obligation to ensure that any new platforms or projects targeting children put those users’ welfare first, and we are skeptical that Facebook is prepared to fulfil this obligation.”

The plan was also met with opposition from the Campaign for a Commercial-Free Childhood, the Center for Humane Technology, Common Sense Media, and the Center for Digital Democracy, who said the app “preys on their fear of missing out as their ravenous desire for approval by peers exploits their developmental growth.

“The platform’s relentless focus on appearance, self-presentation, and branding presents challenges to adolescents’ privacy and well-being,” the opponents said. “Younger children are even less developmentally equipped to deal with these challenges, as they are learning to navigate social interactions, friendships, and their inner sense of strengths during this crucial window of development.”

At the March hearing, Zuckerberg, however, claimed that social apps to connect other people can have positive mental health benefits.

And then in August, Sens. Richard Blumenthal, D-Connecticut, and Marsha Blackburn, R-Tennessee, sent a letter to Zuckerberg asking for their research on mental health. Facebook responded without the company’s research, but said there are challenges with doing such research, the Journal said. “We are not aware of a consensus among studies or experts about how much screen time is ‘too much,’” according to the Journal, citing the response letter to the senators.

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