Amazon to Pay Customers Up to $1,000 in Compensation for Unsafe Items Sold by Third-Party Sellers

An Amazon delivery worker pulls a delivery cart full of packages during its annual Prime Day promotion in New York on June 21, 2021. Brendan McDermid/Reuters

Amazon has announced updates to its complaints and returns policy, with the company set to take on the role of a facilitator between disgruntled customers and third-party sellers and, in some cases, directly paying customers up to $1,000 for third-party products that caused damage or personal injury.

The online retail giant said in an Aug. 10 release that it is expanding its A-Z Guarantee, effective Sept. 1, such that some customers filing property damage and personal injury claims with respect to third-party products sold on the marketplace will be compensated directly by Amazon.

“In the unlikely event a defective product sold through Amazon.com causes property damage or personal injury, Amazon will directly pay customers for claims under $1,000—which account for more than 80 percent of cases—at no cost to sellers, and may step in to pay claims for higher amounts if the seller is unresponsive or rejects a claim we believe to be valid,” Amazon said in the release.

Under Amazon’s current process, customers are encouraged to contact the seller to resolve any issues, with Amazon generally not playing much of a role. But under the new process, customers can contact Amazon’s customer service, which will notify the seller of the problem. Amazon said that, if the seller doesn’t respond, the company will “address the immediate customer concern, bear the cost ourselves, and separately pursue the seller.”

“This streamlined process will save time, money, and effort for both customers and sellers,” Amazon said.

Amazon clarified that it won’t seek to recoup the $1,000 payout to customers from those third-party sellers who hold valid product liability insurance, which is a longstanding requirement.

The company said it is also launching a platform, called the Amazon Insurance Accelerator, that will help third-party sellers buy insurance at competitive rates.

Amazon has in the past drawn scrutiny from lawmakers and regulators over unsafe or banned products listed on its marketplace. In 2019, a group of senators sent a letter (pdf) to then Amazon CEO Jeff Bezos, calling on him to take action to stop the sale of unsafe products on the company’s e-commerce platform and to put in place more accurate warnings on products that require them.

The letter came in response to a Wall Street Journal investigation, which found more than 4,000 items for sale on Amazon that had been declared unsafe or outright banned by federal agencies or regulators, or that had labeling that was deceptive.

After the Wall Street Journal approached Amazon with its findings, the company removed or changed the description on more than half of the problematic listings, according to the report.