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Product Liability

Advertising Groups Rail Against California Bill Which Would Extend Product Liability to Online Retailers

— August 28, 2020

Critics of AB 3262–including Etsy CEO Josh Silverman–say the proposal would hand off the digital market to Amazon, the only company with enough money to comfortably whether the penalties.

Advertising trade groups are claiming that a California consumer protection bill will “have a chilling effect on commercial speech, the availability of digital content, and online commerce during a time when the economy is already under significant strain.”

The proposal—known simply as Assembly Bill 3262—would hold online retailers to the same liability standards as traditional brick-and-mortar businesses. However, recent amendments to AB 3262 extend liability to digital marketplaces which subsist off third-party merchants’ advertising fees.

Trade groups and corporations, including Etsy and eBay, have urged California’s state congress to remove provisions that could harm the advertising industry.

The American Association of Advertising Agencies, American Advertising Federation, Association of National Advertisers, Interactive Advertising Bureau, and the Network Advertising Initiative have also voiced similar opposition to the state’s proposal.

According to CNBC, opponents of AB 3262 say the bill has erroneously expanded it scope to include businesses “placing or facilitating the placement of products into the stream of commerce in this state.” Originally, the bill only covered those businesses which “placed,” or sold, products directly to consumers.

The Amazon Spheres, part of the Amazon headquarters campus in Seattle
The Amazon Spheres, part of the Amazon headquarters campus in Seattle; image courtesy of Biodin via Wikimedia Commons,

Advertisers say that the term “facilitating” is vague and could have be broadly construed—so, for instance, a retailer which advertises third-party merchant wares could be held liable if such third-party merchants sell defective or dangerous products.

Interestingly, AB 3262 has won provisional upport from e-retail giant Amazon—a company which California has expressly said must be held to higher standards of accountability.

“AB 3262 would extend this strict liability law to law to online marketplaces,” Amazon “policy guru” Brian Huseman wrote in a blog post. “If enacted, companies like Amazon could be held liable for damages or injuries caused by items sold by third-party sellers on… If AB 3262 is amended so that all stores, including online marketplaces, are held to the same standards, Amazon stands ready to support this legislation.”

About 60% of Amazon’s online inventory, adds FOX Business, comes from third-party retailers.

However, Etsy CEO Josh Silverman has since accused Amazon of shrewdly backing California’s liability law to smash its competition.

“Amazon is taking bold steps to wipe out its competitors by promoting complex, hard-to-comply-with legislation that only they can afford to absorb,” Silverman said. “Amazon’s goal is to be the only place to buy stuff online, hobbling mom-and-pops that sell unique items in their own shops, or more frequently since COVID, through marketplaces like Etsy. Small businesses, struggling now more than ever, will ultimately bear the brunt of the overbearing burdens of AB 3262.”


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