A Wolf In Sheep’s Clothing

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A Wolf In Sheep’s Clothing

New legislation may soon place increased accountability on e-commerce giants like Amazon, but will it be good for e-commerce overall?

Written by: Joe Bartolotta

For years, Amazon has avoided repercussions for defective products sold from third-party sellers on its Marketplace. But now, the government wants to hold Amazon accountable. Amazon previously stated that it only serves as an intermediary between buyers and third-party sellers, which Amazon refers to as the “Amazon Marketplace” even though it’s not a distinct place on its website. However, two weeks ago, the California courts sided with a customer who sued Amazon after a faulty battery from a third-party seller blew up in her face.

A new bill (AB 3262) would make Amazon responsible for damages or injuries caused by items sold by third-party sellers on its website. Even with the Amazon Marketplace accounting for half of Amazon’s $280B revenue in 2019, Amazon is backing the new bill. In a blog post last week, Amazon stated that they “share the California legislature’s goal of keeping consumers safe. To further that goal, this legislation aimed at protecting consumers should apply equally to all stores, including all online marketplaces. Injured consumers should be able to seek compensation regardless of how a particular online marketplace makes money.”

While this bill would certainly protect end consumers, it could particularly impede on Amazon’s competitors like eBay and Etsy that don’t actually hold inventory. With Amazon’s lobbying, AB 3262 has become an increasingly complicated piece of legislation that is going to be expensive for any small or mid-sized business to try to comply with, and Amazon is betting on that. While AB 3262 will be an inconvenience to the e-commerce behemoth, it could be crushing to smaller e-commerce players.

As the world’s third largest company, Amazon has the tech and legal resources to weather stricter e-commerce regulations. However, these new regulations could block upstarts, hurt existing competitors, and ultimately, reduce consumer choice. This move by Amazon is seemingly in the same vein as previous moves like supporting an online sales tax and increasing its minimum wage to $15. The bottom line is Amazon could afford it, while its competitors couldn’t. And to top it all off, it comes across as a great PR point for the company.