CPSC: Amazon Must Provide Notice and Action Plan To Address Hazardous Products

On July 29, 2024, the U.S. Consumer Product Safety Commission (CPSC or Commission) issued a Decision and Order against Amazon.com, Inc. (Amazon), unanimously finding that 400,000 items sold by third-party sellers through Amazon’s Fulfilled by Amazon (FBA) program presented “substantial product hazards” as defined by the Consumer Product Safety Act (CPSA) and that Amazon was a “distributor” for purposes of the CPSA. The Commission also determined that notices and refunds Amazon had, without CPSC involvement, provided to purchasers were not sufficient to alert consumers to the potential hazards presented by the products. Accordingly, the Commission ordered Amazon to take certain notification and corrective actions.

Following the Commission’s decision on the merits, Amazon requested that the Commission “stay any forthcoming order” in the matter “while Amazon attempts to negotiate” a satisfactory Corrective Action Plan (CAP) and “until a federal district court has issued a final judgment … and all appeals of that judgment have been exhausted.” CPSC Complaint Counsel opposed such a stay, and, on August 16, the Commission denied the motion on the basis that “the only action currently required of Amazon is to develop, in consultation with Complaint Counsel, and submit to the Commission for review and approval, a Proposed Notification Plan and a Proposed Action Plan,” an action that Amazon’s request expressly indicated the company was undertaking. Accordingly, concluded the Commission, “there is no reason to grant the stay.”

This post focuses on the Commission’s recall-related findings, including its reasoning as to why Amazon’s recall efforts were found inadequate and the notification and corrective actions Amazon must take going forward. A companion post discusses the Commission’s finding that Amazon is a “distributor” under the CPSA and the broader implications of that finding.

CPSC’s Mandatory Notification Authority and Mandatory Recall Notices Rule

Under Section 15(c) of the CPSA, once CPSC determines that a product presents a “substantial product hazard” (as defined by Section 15(a)), CPSC has the authority to mandate that a manufacturer, distributor, or retailer of the product recall that product by, for example, notifying consumers and the public of the substantial product hazard if such notice is necessary to “adequately protect the public.”¹ If the Commission determines that notification is necessary, the Commission must then specify the form and content of the notification.² Pursuant to CPSC’s Mandatory Recall Notices Rule, notices for mandatory recalls should include (1) the details concerning the product (including photographs), the hazard, any injuries or deaths, and actions or remedies being taken; (2) the names of manufacturers and retailers; (3) the relevant dates and number of units affected; and (4) the word “recall” in the heading and text of the notification.³

Similarly, under Section 15(d) of the CPSA, CPSC has authority to order companies to provide affected consumers with an approved remedy if doing so would be “in the public interest.”⁴ Such remedies may include replacing the product, repairing any defects, or providing a refund of the purchase price. A manufacturer, distributor, or retailer that is ordered to implement any remedial actions must submit an implementation plan to the Commission for approval and subsequent monitoring.⁵ Under CPSC’s Mandatory Recall Notices Rule, a recall notice may add conditions to the remedy, such as discarding the product or contacting the company.⁶

Fulfilled by Amazon, the Products at Issue, and Amazon’s Initial Response

The FBA program allows third-party sellers to list and sell their consumer products on Amazon.com. As part of the program, Amazon also offers other various services to participating sellers, including but not limited to storing the products in its fulfillment centers, delivery to customers, and processing product returns. Additionally, Amazon controls customer communication and handles all aspects of customer service, including determining whether customers will receive a refund or replacement.

At issue here were three categories of products (Subject Products) sold through the FBA program: (1) children’s sleepwear that allegedly failed federal flammability requirements; (2) allegedly faulty carbon monoxide (CO) detectors; and (3) hair dryers that allegedly lacked required electrocution protection.⁷ After testing the products and determining that they were hazardous, CPSC requested recalls of all three.⁸

Following CPSC’s requests, Amazon contacted purchasers about an “[i]mportant safety notice” by email and through the “Message Center” for the purchaser’s Amazon.com account.⁹ The messages advised of a “potential safety issue” and, depending on the product, further advised that the product “may fail” to work properly or meet federal requirements. Amazon provided the purchasers gift cards and instructed them to dispose of the product, but that there was no need for them to return it.

Administrative Proceeding

In July 2021, the Commission authorized the filing of an administrative complaint against Amazon. The complaint alleged that Amazon’s actions were insufficient to address the hazards posed and that a “Section 15 order requiring Amazon to take additional actions in conjunction with the CPSC as a distributor is necessary for public safety.”¹⁰ Amazon’s response, in relevant part, was that it had not acted as a distributor but instead as a third-party logistics provider. During the administrative proceeding, Amazon did not contest, and in fact stipulated, that the products identified in the Complaint presented a substantial product hazard.

In July 2023, Administrative Law Judge (ALJ) Jason S. Patil issued an Initial Decision and Order on Remedies, finding that Amazon was a distributor under the CPSA, the Subject Products presented substantial product hazards under the CPSA, and that Amazon’s measures to remedy the hazards were deficient.¹¹ The ALJ ordered Amazon to undertake certain actions pursuant to CPSA Sections 15(c) and 15(d) to address the hazards, such as ceasing distribution of the products and posting recall notices on Amazon’s social media platforms. The ALJ also ordered Amazon to issue refunds that would be conditioned upon product return or confirmation of destruction.¹²

Both parties appealed the Initial Decision and Order on Remedies.¹³ The parties participated in oral argument before the Commission in December 2023.

Commission Decision and Order

After conducting a de novo review, the Commission (in a 74-page Decision and Order) adopted many of the ALJ’s determinations, including that Amazon operated as a distributor for purposes of the CPSA and that the products at issue (pursuant to the joint stipulation) posed substantial product hazards. The Commission also agreed with the ALJ that Amazon’s messages were insufficient to adequately protect the public from the substantial product hazards presented by the Subject Products. As a result, the Commission agreed with the ALJ that Amazon is required to give direct notice to purchasers and provide public notice.¹⁴ Moreover, the Commission adopted the ALJ’s conclusion that it is in the public interest that Amazon issue full refunds conditioned upon return or proof of destruction.

The Commission concluded that Amazon’s messages were insufficient to protect the public for the following reasons:

• The Commission highlighted that, despite acknowledging that at least some of the Subject Products were resold, Amazon contacted only those products’ initial purchasers. The Commission reasoned that notice must be given to as many members of the public as possible to ensure anyone who obtained the Subject Products indirectly can protect themselves. However, Amazon made no attempt to alert the general public and instead “placed the burden of such notice on its customers — requesting that they inform others who received the products from them about the hazard.”¹⁵
• The Commission noted Amazon’s messages to customers failed to use the term “recall” as required for recall notices by 16 C.F.R. § 1115.27(a). As reflected in guidelines the Commission’s Decision and Order cites, the word “recall” draws consumer attention to a notice.¹⁶ Amazon’s messages, however, were instead “more obscure[],” stating either “Attention: Important safety notice about your past Amazon order” or “Important safety notice about your past Amazon order.”¹⁷
• The Commission found Amazon’s messages also failed to clearly describe the product hazard as required by 16 C.F.R. § 1115.27(f). Instead of making it clear that the Subject Products had failed their respective safety tests, thereby adequately informing customers of the substantial risk of injury, Amazon merely advised purchasers of a “potential safety issue that may impact your Amazon purchase(s)” and that the products “may fail” requirements.¹⁸
• The Commission found the messages also lacked sufficient information for customers to identify the product, as required by Section 15(i)(2)(A), such as a high quality, readily accessible photograph of the product. As the Commission described it, Amazon’s messages included a “cumbersome multistep process” that involved clicking on a link and further web navigation to ultimately view an icon-sized photograph of the product, thereby increasing the risk that a consumer would fail to take action to avoid the hazard.¹⁹
• Other information the Commission found was missing from the messages included the number of units affected by the recall and contact information concerning the remedy, all of which would have enabled consumers to better understand the scope of the recall.²⁰
• The Commission found that Amazon’s messages to customers — that they should dispose of the product and that their account would be credited — failed to incentivize customers to stop using the Subject Products and to remove them from their homes. Furthermore, the Commission found that, by stating only that the product “may” cause harm and advising purchasers that they did not need to return the product, Amazon “downplayed the severity of the hazard.”²¹

With respect to its conclusion that it is in the public interest that Amazon not only issue a notice, but also implement remedies in the form of conditioned returns or refunds, the Commission found the following:

• Agreeing with ALJ Patil, the Commission found that removing the Subject Products from consumers’ homes is in the public interest, as doing so protects the public from unreasonable risk of injury and is consistent with the Commission’s Mandatory Recall Notices Rule.²²
• On appeal, Amazon contended that the Commission lacks the authority to order a condition because the only remedies available by the Commission under Section 15(d) are repair, replacement, and refund.²³ The Commission found Amazon’s argument unpersuasive, finding that “conditioning refunds or replacements of the Subject Products upon return or proof of destruction is authorized by the CPSA, consistent with Commission policy and practice, and in the public interest because it prevents continuing consumer harm.”²⁴

Next Steps for Amazon

The Commission set aside the ALJ’s Order and replaced it with a new Order, under which Amazon is required to develop, in consultation with Complaint Counsel, a Proposed Notification Plan and Proposed Action Plan in accordance with the Commission’s findings and the CPSA.²⁵ The Proposed Notification Plan is required to include direct and public recall notices for the Commission’s review and approval, in addition to recommendations for disseminating the public notice.

The Proposed Action Plan requires Amazon to propose:

• A process for implementing refunds and replacements conditioned on return or proof of destruction
• A quarantine and destruction process for Subject Products
• A schedule for monthly progress reports and a records retention plan²⁶

Under the Order, Amazon would deliver the Proposed Notification Plan and Proposed Action Plan to Complaint Counsel, after which they would meet and confer and Amazon would eventually file the plans with the Commission. The Commission must approve the plans before Amazon is able to provide any notice or take any action pursuant to Sections 15(c) and 15(d), respectively. Once it has finished its review, the Commission would issue a second order. As noted above, Amazon’s request for a stay was denied.

However, under the CPSA and the Administrative Procedure Act, Amazon has the right to judicial review in federal court. As of this writing, such an action had not yet been filed, although Amazon’s request for a stay expressly stated that Amazon believes there are issues that are appropriate for judicial review and is at least contemplating seeking its day in court.

For questions about CPSC policy or about compliance with the Consumer Product Safety Act, including timely reporting and recalls under Section 15(b) of the CPSA, or with other product safety matters, please reach out to the authors of this blog post or any of their colleagues on Arnold & Porter’s Consumer Product Safety team.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.