Emerging liability of online trading platforms for defective products?

With up to one third of the world population in some form of Covid-19 lockdown during the last months, it is unsurprising that online platforms have been identified as “clear winners” of the global pandemic. However, the surge in demand for online shopping and contactless deliveries is accompanied by an increased regulatory focus on online trading platforms and their role in preventing the distribution of possibly harmful products. Even though online trading platforms are unlikely to be liable under the European Product Liability Directive at present, a number of recent initiatives with a particular focus on online trading platforms may signal change on the horizon.

Current status in the USA and the EU

A look at jurisprudence in the USA suggests that online platforms may be closer to product liability than one might assume. The California Court of Appeal recently found that online platforms can be held liable for injury caused by defective products even if the platform is neither the producer nor the seller, because of its “pivotal role” in bringing the product to the customer (Bolger v. Amazon.com, LLC). Although other US courts have dismissed similar claims, the recent decision from California follows two earlier judgements from the Ohia and Pennsylvania Court of Appeals that argued along the same lines. Should the trend continue, online platforms could be faced with the choice between significant legal costs for defending product liability claims and a strict enforcement of product safety measures among their sellers.

The situation under the European Product Liability Directive is slightly different at present. While the Product Liability Directive 85/374/EEC does provide for the liability of first-time importers of products and, in cases where the producer or importer cannot be identified, suppliers of a product, it is questionable whether the requirements of supplier liability will be met in the majority of cases.

It is firstly unlikely that online trading platforms will be liable as first-time importers into the EEC. Instead, where the product does not originate from within the EU, the importer will usually be the seller sending the product either directly to the customer or to the EU fulfilment centre of the trading platform.

Secondly, while it is unclear whether online trading platforms qualify as suppliers in the sense of Art. 3 (3) of the Product Liability Directive - in particular where they only facilitate the sale of a certain product -, the further requirements for supplier liability under the Product will rarely be met. In particular, Art. 3 (3) provides that the supplier will only be liable, if the producer or importer cannot be identified. Where a product bears a distinguishable producer’s trademark or sign or is accompanied by some form of instructions or invoice providing for the identity of the producer or importer, there will be no room for supplier liability. The same will be the case where the platform can identify the seller, importer or producer from its own records. Thus, platforms are unlikely to be found liable under the Product Liability Directive as long as the producer, importer or next supplier in the supply chain can be identified.

Change on the horizon?

Even though online platform liability for defective products is rather unlikely at present, there are a number of current legislative initiatives with an increased focus on online trading platforms and their role in the distribution of products within the EU.

In June 2019, the new Regulation 2019/1020 on Market Surveillance and Compliance of Products was adopted, which will enter into force in two stages on 1 January 2021 and 16 July 2021. According to its recitals 13 and 18, the Regulation’s purpose is to meet the "challenges of the global market and increasingly complex supply chains" by establishing enforcement measures to ensure the safety of consumers and a level playing field for all economic operators. Under the new Regulation, fulfilment service providers are now to be included as economic actors in the supply chain to fill gaps in the enforcement system and to ensure that market surveillance authorities can take appropriate action where no other economic operator is established in the EU (recital 18) and where the fulfilment service provider has actual knowledge of illegal activity or information (recital 16).

Even though the new regulation does not provide for product liability in the strict sense, it does provide for market surveillance and product safety obligations of economic operators, the violation of which may give rise to liability under national tort law. It also remains to be seen whether national legislators or courts will consider the classification of fulfilment service providers as part of the supply chain indicative (if not mandatory) for their inclusion in the definition of suppliers under Art. 3 (3) of the Product Liability Directive. It is, however, clear that e-commerce and online trading have come into EU legislators’ focus where consumer safety is concerned.