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1. Amazon can be liable for defective products on its 3rd-party marketplace
  • A California appeals court recently ruled that Amazon can be held liable for products sold on its 3rd-party marketplace, reversing a 2019 decision and challenging Amazon’s long-held stance that it is one or more degrees removed from the arena of liability. The plaintiff had purchased a non-OEM laptop battery from a 3rd-party seller with a fictitious name on Amazon.com. The battery, fulfilled by Amazon from its own warehouse, later exploded and resulted in 3rd-degree burns. The court based its decision on Amazon’s roles as intermediary and distributor: “Whatever term we use to describe Amazon’s role...it was pivotal in bringing the product here to the consumer.” Amazon plans to appeal.
  • In the 3rd-party seller model, until recently, Amazon has been able to hold itself apart as a provider of services to the seller rather than being the “seller of record” itself. It generally has relied upon a combination of Section 230 (which protects platforms from being held liable for 3rd-party content) and the body of law that attributes liability to the seller of record. Amazon does not take title or ownership to items sold by 3rd-party sellers, and those items on Amazon.com have “sold by [Seller]” language on their product page.
  • Amazon’s liability for 3rd-party products has been a shifting landscape. In a Jul 2019 case involving a retractable dog leash that blinded a woman, a Pennsylvania appeals court ruled Amazon could be liable for products sold on its platform even if it had not shipped the item. The opinion – a reversal of the lower-court decision and prior federal rulings – said liability stemmed in part from Amazon’s role as middleman, which made it harder for customers to pursue a claim against the seller or manufacturer. The decision was later vacated in Feb 2020 and the Pennsylvania Supreme Court agreed to take the case in Jul 2020.
  • Over the past year, there has been growing attention on Amazon’s challenges in monitoring and removing thousands of counterfeit, defective, unsafe, banned, mislabeled, and expired items from its marketplace. In Apr 2020, for instance, the US Trade Representative put Amazon.ca (Canada), Amazon.de (Germany), Amazon.co.uk (UK), Amazon.fr (France), Amazon.in (India) on its “Notorious Markets” list for counterfeit goods.
  • Amazon’s 3rd-party marketplace now represents more than half its retail business. There’s a tension between an open marketplace growing rapidly by streamlining access for smaller 3rd-party sellers, and a large branded retail platform where consumers expect some quality and gating. This is an existential moment where cracks are emerging in the business model that helped Amazon’s retail business get to its current scale. With Amazon offering tools for sellers at nearly every stage of the lifecycle – from marketing to fulfillment – at some point it seems disingenuous for Amazon to disclaim responsibility when it’s performing so many business activities for a seller.
  • Amazon is also getting stricter with its 3rd-party sellers, recently beginning to require US sellers to show their business name and address on public-facing profiles. As more responsibility cascades to Amazon’s 3rd-party sellers (e.g. to register, test, certify, tag, track and inspect), we may see a departure of sellers from the Amazon platform to challenger marketplaces (e.g. Walmart and Kroger’s).
Related Briefs:
  • Aug 14 2020 (3 Shifts): All roads lead to ecommerce as retailers invest in fulfillment and online assortment
  • Nov 11 2019: Why Amazon’s recent challenges are rooted in its business model
2. Trump’s WeChat ban could have sweeping consequences for US companies
  • Over the past week, there has been growing realization that US president Trump’s executive order on Aug 6 2020 banning US entities from working with WeChat may have sweeping consequences for US companies. The ban, which will be effective Sep 20 2020, is being framed in terms of national security. It is part of a broader campaign to prevent Chinese apps – and by extension, the Chinese government – from capturing data on US citizens and spreading disinformation. However, depending on its interpretation, many US brands may soon face serious constraints ughin operating in what will soon be the largest retail market in the world and selling to the Chinese diaspora.
  • The language of the executive order is ambiguous in what exactly it prohibits: “[A]ny transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd...or any subsidiary of that entity, as identified by the Secretary of Commerce ...” Tencent, a very active investor, holds stakes in many US firms, including Tesla, Snap, Epic Games, Activision Blizzard, Reddit, Spotify, Universal Music Group, and more, raising early questions as to whether those investments would be impacted. According to a follow-on clarification from the White House, however, the intent of the executive order was to target WeChat-related transactions rather than all transactions associated with Tencent.
  • Banning WeChat by name is also significant, raising another set of questions. WeChat is the name of the international version of the app used outside China (i.e. in the US), while Weixin is the name of the mainland-China equivalent. Global commentators and journalists often refer to Weixin as WeChat, and users on both apps can talk to each other. However, WeChat is a different app from Weixin that stores data on servers in Canada and Hong Kong, and is estimated to have just 19M daily active users in the US. Tencent, which saw its market capitalization drop 10% after Trump’s announcement, is currently seeking clarification on the WeChat/Weixin distinction.
  • For US companies with business in China or with Chinese consumers, the potential ramifications are serious. The app may have to be removed from Apple and Google’s app stores. In 2019, Apple generated $44B in revenue from China, its biggest international market at 17% of total revenue. A recent survey of Chinese consumers found that 95% would change their devices rather than give up Weixin. Globally, removing WeChat and Weixin could result in a 25-30% drop in iPhone sales and a 15-25% decline in other Apple hardware (e.g. iPad, Mac computers). If the ban only involves WeChat and not Weixin, the decline in iPhone shipments would be less, as little as 3-6% globally.
  • Many other US corporations also have a stake in the interpretation of the ban. Nike, KFC, Starbucks, Amazon, Walmart and others use branded Weixin “mini-appscloud-based embedded programs in Weixin that don’t require a download – to market and sell to Chinese consumers. Over a dozen major US companies recently had a call with White House officials to express concerns over the ban and the “severe disadvantage” it could cause to US competitiveness. Trump administration officials provided private assurances that they should be able to continue to do business with WeChat in China, but the president could still overrule them on the scope of the ban.
Related Briefs:
  • Jun 5 2020 (3 Shifts): Huawei’s global competitiveness is threatened by international pressure
  • Apr 4 2020: Global supply chains diversify away from China
3. Oracle & Salesforce face GDPR lawsuit for their 3rd-party cookies’ role in real-time bidding
  • Last week, European nonprofit The Privacy Collective filed a class-action lawsuit against Oracle and Salesforce for allegedly violating the EU’s GDPR (General Data Protection Regulation) by using 3rd-party cookies to track consumers across the internet and gather data used to target them during real-time bidding. A similar case will be filed against the same companies in the UK later this month – total claims could exceed €10B ($12B) if the claimant wins all its arguments.
  • Both enterprise software vendors own data management platforms (DMP) – Oracle acquired BlueKai (now Oracle DMP) in 2014 and Salesforce acquired Krux (now Salesforce DMP) in 2016. These DMPs amass large stores of consumer data for ad-targeting through mechanisms like 3rd-party cookies. Oracle gathers data on 1.4B+ users every month, while Salesforce interacts with 3B+ browsers/devices every month.
  • GDPR requires privacy by default and that consent be “freely given, specific, informed and unambiguous.” Central to the lawsuit is the process of real-time bidding (RTB), in which online ad inventory is bought and sold programmatically in milliseconds through a real-time auction, with the winning bid displaying the ad to the consumer. The individual consumer’s data is broadcast to sometimes hundreds of auction participants during real-time bidding for targeting purposes.
  • The lawsuit claims RTB violates GDPR because the broadcast approach and rapid pace make it impossible to fully secure the data or give consumers proper time or notice to consent. Oracle has responded to the claims saying it has “no direct role” in RTB; Salesforce has also disagreed with the claims.
  • Today, over 90% of websites have 3rd-party cookies, which are often set to be longer-lived than just that browser session or that day. A news site like The Washington Post might have 40 cookies. However, the norms around consumer personal data are changing rapidly, with all future paths leading to and through consent. The coming end of 3rd-party cookies will be hugely disruptive to the advertising ecosystem – resulting in an “adtech winter” and massive discontinuity.
Related Briefs:
  • Jun 24 2020: Publishers & retail brands adapt to the coming death of 3rd-party cookies
  • Dec 30 2019: The CA privacy law effective Jan 1 will set the tone for US regulation
Disclosure: Amazon and Google are vendors of 6Pages.
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