How Amazon Dodges Responsibility for Unsafe Products: The Case of the Hoverboard

Courts are starting to challenge the idea that big tech companies are mere platforms connecting buyers and sellers

By Alexandra Berzon Dec. 5, 2019 11:27 am ET

On Jan. 9, 2016, Nashville teen Matthew Fox was upstairs playing videogames while his parents, Brian and Megan Fox, were out getting supplies for his birthday party.

Downstairs in the living room the self-balancing scooter Matthew had received for Christmas caught fire.

Flames tore through the red brick house. Matthew’s older sister, Hailey, jumped out a second-story window and crashed into their father, who had just returned home. Mr. Fox climbed a ladder to reach his son and was knocked off when Matthew jumped out of a window.

The three escaped with a twisted ankle for Hailey, broken bones in the elbow for Mr. Fox and cuts, stitches and nerve damage for Matthew, according to family statements in court depositions.

The Wall Street Journal obtained government investigation reports for that and 56 other hoverboard fires, explosions and similar issues from the end of 2015 to the first few months of 2016, household disasters that were a bleak feature of that Christmas season. Together the fires caused at least $2.3 million in property damage and a handful of minor injuries.

Almost half of the hoverboards, including the Foxes’, were purchased on Amazon—the most by far of any retailer during that period.

What followed were at least 17 lawsuits against Amazon.com Inc. from insurance companies and families, including the Foxes, relating to problems with hoverboards largely shipped from unknown factories in China. Around half of those legal battles are still active.

The cases are testing a longtime argument made by Amazon and other internet companies, one that underpins the modern tech industry. We are just operating a platform that connects buyers and sellers, the argument goes. It’s up to the sellers who use our site to make sure that they meet proper safety standards. 

A similar argument is made by ride-sharing companies, online babysitting services and social-media platforms.

“It’s a national consumer question that needs to be settled,” said Darren Penn, an attorney in Atlanta representing a man named Irvin Love who got severe burns on his face, head, shoulders and arm when a hoverboard he bought on Amazon burned up. “You are providing a service to consumers. You have to do it in a reasonable and nonnegligent manner.”

The issue comes at a critical moment for the web retailer, as it faces rising concerns from legislators and the public about the sale of dangerous, banned and counterfeit products.

The hoverboard cases have produced a trove of documents, including thousands of pages of depositions by Amazon executives and internal emails.

Those documents, along with government investigation records and interviews with former employees and other experts, show that Amazon took steps to stem the safety problems, including by temporarily removing all listings after reports of dangers emerged and by sending emails to previous buyers noting safety issues. That prompted praise from regulators.

The inside look nonetheless shows the vulnerability in the vast scale and relatively anonymous structure of Amazon’s platform. Amazon had around 60,000 listings of different hoverboards at various times in 2015, one of the company’s safety employees said in a deposition, from thousands of sellers, many offering no indication of where the products came from.

An Amazon spokeswoman said that with limited data at the time “and with our customers in mind,” the company acted. She called the Journal’s reporting on what had occurred misleading. “Amazon acted on feedback from customers to proactively stop sales, notify customers about safety concerns, and offer full refunds,” she said, and noted that it prohibits counterfeit products.

In court cases, Amazon has argued it isn’t a seller and isn’t liable under some state product-safety laws.

Hoverboards from a range of manufacturers and retailers were involved in fires, government investigators found, and were later recalled due to a risk of overheating batteries. One problem early on was that the hoverboards were being made and shipped on a large scale before testing standards had been established. In many of the Amazon fire-related incidents, government investigators couldn’t figure out who made or imported the devices—information that helps facilitate safety measures such as recalls.

Hoverboard Danger

 

The government investigated 57 fires related to hoverboards in late 2015 and early 2016, almost half bought on Amazon. Many of those fires occurred after Amazon sent a letter to buyers about safety issues on Dec. 12.

Most of the big box stores that sold hoverboards then, such as Target and Walmart, listed them from among a handful of companies, such as the Indiana-based Swagway LLC. Swagway voluntarily recalled its boards in July 2016.

Amazon has faced other problems with fast-moving phenomena, with hundreds or thousands of knockoffs offered by anonymous manufacturers and sellers: fidget spinners that consumer advocates found had high lead content, solar eclipse-viewing glasses that didn’t meet safety standards and high-powered magnetic toys that were found by the Consumer Product Safety Commission to be a danger to children, according to former Amazon employees.

Elliot Kaye, a commissioner at the Consumer Product Safety Commission, said hoverboards were the harbinger. The combination of the flea-market-style model coupled with a new product, “made hoverboards unique and certainly was an indication of a change and a new challenge that I’m still not sure the federal government is equipped to address,” Mr. Kaye said.

The first complaints

 

Customers began complaining to Amazon about explosions, fire, heat, smoke or similar hoverboard concerns as far back as April 2015, with more concerns coming that August, September and October, according to an internal investigation report viewed by the Journal. Amazon’s own safety systems didn’t flag the problem at first.

It was only after hearing news reports in November that Damon Jones, then manager of product safety at the e-retailer, began overseeing an investigation that involved using a software tool called Heartbeat to scour customer reviews for keywords suggesting certain dangers, such as fires and explosions, according to court records.

Initially the tools didn’t pick up any evident problems, according to court records. The tools were designed to look for dangers in a specific product listing, not a broad category of products.

After further research, including talking to other Amazon employees and with government officials investigating incidents that had been reported to them separately, the safety team began to see that fire and explosion issues had shown up in some consumer complaints, the documents show.

One of Mr. Jones’ discoveries was that many of the boards were arriving to customers in boxes that said “Smart Balance Wheel.” Many had the model number 650X245X230, making them seem like they were all the same brand and model. But in fact the boards inside weren’t identical, and the manufacturers were a mystery in most cases. 

Government investigators were rarely able to figure out who was making the boards as well. Their investigations were initiated by consumers, news reports and fire departments, according to the reports; none was first described as being reported to the government by Amazon itself.

One successful search unfolded like a detective novel. The board, bought on Amazon, had caught fire on Nov. 20 in a bedroom in Torrance, Calif., causing one man to be taken to the hospital for smoke inhalation and minor burns, according to investigation reports.

A CPSC investigator named Kathy Bellenfant first tried to find the company listed on the box. That address turned out to be a UPS store in Baldwin Park, Calif., with no record of the seller. After repeated calls to UPS’s 800 number, Ms. Bellenfant turned up an address for the store that shipped the board: a nondescript office building in suburban Los Angeles.

The owner of the store, Tsz Sum Tam, said that according to the manufacturer, “They do not feel the scooter is defective,” Ms. Bellenfant wrote. Mr. Tam eventually handed over documentation showing the hoverboard was made by a factory in China called Guangzhou Fordigi International Co.

According to shipping records, the factory sent the hoverboards exclusively to One Stop Electronic and an affiliated company, which sold them on Amazon.

Mr. Tam couldn’t be reached for comment. Guangzhou Fordigi didn’t respond to requests for comment.

The issues also seemed spread out among various listings, with no one or two sellers being the only problem.

“It certainly was outside our experience at Amazon,” Mr. Jones said in a 2017 legal deposition. “The fact that it was spread across so many manufacturers, so many brands, so many components, there—there was no precedent for this kind of event in the product safety community.”

Amazon ultimately discovered that 17 customers had complaints in the U.S. concerning hoverboard fire and explosion risks, while five similar complaints covered other products with large lithium batteries, such as electric scooters, according to internal investigation documents.

Late on Dec. 10, the company’s head of retail in North America, Doug Herrington, sent an urgent note to Jeff Wilke, Amazon’s head of consumer products, according to court documents: The company was about to take the unusual step of temporarily removing all hoverboards.

“We are concerned that these reports might be indicative of a safety issue of these products across Chinese manufacturing,” Mr. Herrington wrote, noting that 245,000 hoverboards had been sold on the site in the previous 30 days. He noted that at least a quarter of those hadn’t been delivered yet, and that many of those that had been delivered likely hadn’t been opened yet because they were holiday gifts.

He added there wasn’t enough information to issue a recall of the products already sold, but they would give charging and riding tips to buyers in “a non-alarmist way.”

Mr. Wilke responded, “Wow. Tough decision, but the right one. Please keep me posted. Let’s make sure we assume our email will be headline news.”

Amazon’s letter to consumers, sent Dec. 12, made no mention of fires. It told consumers there had been news reports of safety issues and said they could contact customer service to initiate a return if they wanted.

“With only 17 isolated, unverified complaints across thousands of hover board products and brands, we messaged customers to provide factual, informative, ‘non-alarmist’ guidance,” the Amazon spokeswoman said. “It would have been irresponsible to incite ‘alarm’ or panic based on such limited data.”

Helen Walter, who had bought one as a Christmas present in 2015 for her grandson in Kentucky, said as part of a court filing she didn’t remember getting the letter. She did recall in the filing that soon after Dec. 12, the company that had sold her the hoverboard sent an email through Amazon reassuring her the product was safe, according to court records.

“We have sold thousands of them all over the world, we never hear any safety issue from our clients so far,” a person identified as Icy wrote on behalf of the Amazon seller Cool5Pix.

More than a year later, the hoverboard went up in flames.

Cool5Pix is no longer listed as a seller on Amazon and couldn’t be reached for comment.

About $41.1 million was refunded to customers by the end of January—about 19% of all the boards sold on the site. Amazon removed 13,100 listings from 4,900 sellers, more than half from China, according to an internal company report. A few weeks later the company reinstated just 173 listings from 11 sellers that had provided additional certification documents.

Executives at the company also began working on procedures for recalling and issuing refunds to customers, along with other new safety processes, according to internal documents.

Many in the product safety world praised Amazon’s actions at the time. Mr. Kaye, who was then chairman of the CPSC, said in a January written statement he wanted to “commend Amazon for voluntarily stepping up, providing a free remedy and putting customer safety first.” He encouraged other retailers to stop selling boards and issue refunds.

The actions, however, didn’t stop many of the boards that had come in through Amazon’s platform from remaining in customer homes.

On Christmas day, Amazon’s Mr. Jones said he periodically checked customer reviews: He noticed complaints of smoke, burning smells and sparks, but no fires, documents show. 

In February 2016, the CPSC issued an open letter to hoverboard manufacturers and retailers telling them that any board not tested to the UL safety standards, which had just come out, was defective. That effectively meant that all hoverboards on the market were problematic. Amazon again delisted hoverboards for a period.

It took another six months before official recall notices for specific models went out through the CPSC. The commission is involved in overseeing recalls, but the notices are generally made voluntarily by manufacturers, importers or sellers. That is difficult when those entities are hard to find or outside the U.S. None of the recall notices mentioned the hoverboards listed on Amazon that had 28 fire-related safety mishaps investigated by the CPSC.

Hoverboard fire issues continued to come up at the CPSC as some of the problems they saw shifted more to other internet retailers, according to people familiar with investigations. The CPSC has reported more than 200 incidents after the time period studied by the Journal. A CPSC spokesman said the agency continues to investigate hoverboard fires.

Amazon rules now require sellers to apply in advance to sell hoverboards and submit documentation for testing to UL certification. The Journal found that most of the current listings don’t contain enough information for consumers to verify that certification.

In an analysis of listings on the site in November, the Journal identified around 3,000 hoverboards for sale by 631 different sellers. Of the listings, 489 claimed to be UL certified. Just 97—about 20% of the listings—disclosed basic information, such as the name of the manufacturer, needed to verify the certifications.

The suits

 

For years, internet giants such as Amazon, Facebook Inc., Twitter Inc. and Alphabet Inc. ’s YouTube have said that they aren’t responsible for what happens on their platforms, frequently citing a provision of the 1996 Communications Decency Act that says internet providers aren’t responsible for what people say on their sites. Courts have often agreed.

In product-safety suits against Amazon, some have argued that its central role in sales makes it like a bricks-and-mortar store, accountable for the safety of what is on its shelves under certain state laws. Amazon has said it isn’t a seller, and therefore isn’t responsible under those laws.

Recent court decisions have challenged that idea. Over the summer, a federal appeals court in a case not involving hoverboards said that a customer could sue Amazon for providing an unsafe product under state liability laws. Amazon appealed and the larger court agreed to reconsider it, with a hearing scheduled for next year. Some of the hoverboard cases were on hold awaiting the outcome, but are now moving forward again.

Several other hoverboard lawsuits, including the case from Mr. Love, argued that Amazon was negligent for listing a product it knew could catch on fire. Amazon responded that Mr. Love’s case hadn’t presented enough evidence that Amazon knew about the fires before the sale on Nov. 22.

After one court dismissed Mr. Love’s case, the Court of Appeals for the 11th Circuit said he could continue trying to make his case.

In the Fox family’s case, Megan Fox purchased the hoverboard for her son from a seller named W-Deals on Amazon. The listing said little about the company or where the board was made, like a lot of the listings she and her husband had looked at.

“When we bought this, we believed we were buying it from Amazon,” Mr. Fox said.

The Foxes’ hoverboard arrived in a “Smart Balance Wheel” box from China in time for Christmas.

After the Jan. 9 fire, the house was uninhabitable and most of their possessions were destroyed. The family would not rebuild.

The Foxes sued W2M Trading Corp., the company Amazon said was behind W-Deals, as well as Amazon. Kevin Ma, who was named as being the registered agent for W2M in court filings, didn’t respond to any of the Fox family’s attempts to serve him court papers.

Five other hoverboards from W-Deals had also gone up in flames, according to CPSC investigation reports and court documents in the Fox case. An email from W-Deals in February 2016 sent through the Amazon Marketplace told consumers to “dispose of the item effective immediately” and “Use at your own risk.”

The Journal couldn’t reach Mr. Ma.

Later, an engineer hired by the Foxes examined their hoverboard’s scorched remains and a new version of the same board, and concluded the battery likely caused the fire, a determination Amazon didn’t dispute. The battery had been advertised as Samsung but was actually made by a company in China called HOPcell, the examiner found.

Reached by phone, a HOPcell representative said, “It’s nonsense.”

The family said in its lawsuit against Amazon that the e-retailer had violated state product liability laws by selling an unsafe product. The court disagreed, contending that Amazon didn’t have enough control over the product to be considered the seller.

The family also argued that Amazon had assumed a duty to warn the Foxes about the dangers of the hoverboard. Amazon was negligent because it omitted the extent of its knowledge about the fires in its Dec. 12 letter to customers, the family argued.

That argument was also initially rejected by a federal-district court, but the Court of Appeals for the 6th Circuit in June said that the Foxes could move forward with trying to make that claim.

After the fire, the Fox family learned that the friends who recommended the W-Deals board had also seen their hoverboard catch fire. The friends hadn’t thought to mention it because they didn’t know it was part of a pattern, said Mr. Fox’s attorney, Steve Anderson.

“They didn’t think it was that big a deal,” Mr. Anderson said. “They thought it was isolated.”

—Shane Shifflett, Lisa Schwartz and Fanfan Wang contributed to this article.

https://www.wsj.com/articles/how-amazon-dodges-responsibility-for-unsafe-products-the-case-of-the-hoverboard-11575563270