Amazon has long contended that it shouldn't be held legally liable for defective products sold by third-party merchants on Amazon.com, maintaining that the liability rests with the seller, not with the marketplace facilitating the sale.

It's a legal argument with parallels to those made by Facebook and other social networks about their own liability for content on their platforms.

But in a surprise twist, Amazon recently announced that it will directly compensate customers for valid claims of property damage or personal injury caused by third-party products sold on its platform, up to $1,000, or more in certain situations.

The program begins next week.

"It's a big deal because Amazon is coming to the table," offering to handle the problem for consumers and third-party merchants, said Venkat Balasubramani, a Seattle-based technology attorney and co-founder of the Focal PLLC law firm.

However, as he notes, Amazon isn't accepting legal liability. In that way, it's also a strategic move that addresses Amazon's own legal and regulatory challenges.

Amazon is taking voluntary responsibility for defective third-party products on its own terms, trying to show that it's addressing the problem without the need for regulation or legislation. By maintaining that it's actually "going far beyond" its legal obligations, it's also seeking to avoid playing by other people's rules.

The move comes as a series of court rulings threaten to subject Amazon to greater liability for products sold on its platform, which could have vast financial implications for the company.

Legal commentator Eric Goldman once warned that it could even force the company to shut down its marketplace, focusing on first-party retail sales.

Another important backdrop for the policy is a suit recently filed against Amazon by the U.S. Consumer Product Safety Commission (CPSC), seeking to force the retailer to accept legal responsibility for recalling defective products sold on its marketplace.

"This is just Amazon seeing the storm coming, trying to get ahead of it, and covering their butts," said Jason Boyce, a former Amazon seller, founder of Avenue7Media, and author of "The Amazon Jungle."

Asked why the company decided to launch the new program now, a spokesperson said the move "builds on the continued investment we’ve made in helping sellers grow their businesses, and in protecting our store from fraud and abuse."

Amazon says it spent $18 billion in 2020 on logistics, tools, services, programs and personnel to support third-party sellers.

On this episode of Day 2, GeekWire's podcast about everything Amazon, we discuss the new policy with Balasubramani and Boyce, and explore the implications for consumers, third-party sellers, and the company.

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Gisela Hausmann had a unique perspective on Amazon when she started a job in 2019 as a front-line worker at one of the company's delivery hubs in South Carolina.

A native of Vienna, Austria, she had years of experience as a logistics professional, learning the industry from the ground up at FedEx, and working for a major ocean freight shipping company. She had also been following Amazon closely for many years as an independent author using its platforms to publish books.

To say that she thought highly of Amazon and its founder Jeff Bezos would be an understatement. Based on her experience as an early author on the Kindle and CreateSpace platforms, she especially admired Amazon's impact on publishing.

"I saw them doing the things that [authors] barely dreamed about, because this was so amazing that nobody even hoped that it could happen — then Bezos did it!" Hausmann says. "He was a god in my eyes. I call him the new Gutenberg."

Working at the Amazon Delivery Station did not give her the same feeling.

As she explains, the work itself wasn't the problem. After getting up to speed in her job stowing packages, she was able to exceed Amazon's productivity benchmarks. She didn't see or experience commonly reported problems in Amazon's warehouses, such as workers skipping bathroom breaks to keep up.

But she was surprised at what she describes as lackluster training, a lack of clear best practices, an apparent inability to turn input from well-meaning employees into operational improvements, and an overall disconnect between Amazon's leadership principles and the realities of its fast-growing delivery network.

After 468 days, Hausmann decided to leave due to what she described as an accumulation of frustrations.

She says she hadn't planned to write a book when she started the job. Her main objective was to work her way up in the logistics division of a company she admires. But she changed her mind after realizing that her first-hand experience, combined with her background, could provide some unique and potentially valuable insights for people interested in the company.

Her book, Inside Amazon: My Story, includes recommendations and ideas for Amazon, which she hopes might catch the attention of Amazon's executives as they work to fulfill the company's latest leadership principle of striving to be "Earth's Best Employer."

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Direct retail sales are poised to represent less than half of Amazon's business for the first time in its history — a fundamental shift that reflects the e-commerce giant's expansion beyond its roots as an online store.

Revenue from Amazon Web Services, Amazon Prime, third-party seller services, online advertising and other services added up to 49.3% of Amazon's business in the second quarter. It was a new high, almost matching the company's revenue from online and physical stores, and on a trajectory to surpass them in the future.

That's one of several takeaways from Amazon's second-quarter earnings report, released Thursday afternoon. On this episode of Day 2, GeekWire's Podcast about everything Amazon, we nerd out over Amazon's numbers.

Joining GeekWire co-founder Todd Bishop for the discussion are two online retail industry veterans who pay close attention to Amazon's business:

• Our podcast collaborator, Jason Boyce, former Top 200 third-party seller, founder of Avenue7Media and co-author of The Amazon Jungle.
• Andrea Leigh, vice president of strategy and insights at Ideoclick, a Seattle-based e-commerce technology and services firm that works with vendors to Amazon’s first-party retail sales, and third-party sellers. Leigh was an Amazon general manager and retail category leader for nearly 10 years.

Coverage of Amazon earnings:

• Amazon sales of $113B disappoint Wall Street but profits of $7.8B exceed expectations
• Amazon’s advertising business is surging amid industry-wide ad sales boom for tech giants
• Amazon boosting wages and hiring incentives to keep up in competitive labor market

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