everal months ago, I chaired an online seminar discussing the relationship between manufacturers and retailers in handling product safety issues.¹ In addition, years ago, when I was an in-house lawyer, and more recently as a product safety lawyer, I’ve had a number of experiences with retailers that sold my company’s or my client’s products. This article will address some of the issues discussed during that online seminar, as well as some of my individual experiences in dealing with retailers.

In addition, I will discuss a new product safety initiative just announced by Amazon which offers a useful summary of techniques that can be utilized by manufacturers and retailers to make safer products and engage in more effective recalls.

The first thing to point out is that each retailer has different procedures for how they deal with manufacturers and consumers. Therefore, my experience in dealing with retailers and manufacturers might differ from other companies depending on the circumstances and the companies involved. Despite that, this article will point out some of the issues that need to be considered by manufacturers when dealing with retailers who sell their products.

The first issue involves sales by a manufacturer to a retailer. If the retailer sells the product and does nothing to that product, their duties and responsibilities, as well as their potential liability, are minimal. The law says that a retailer has no duty to test and inspect the products they sell and is not liable for any subsequent injury unless they knew or should have known that the product was hazardous.

However, there are some retailers that voluntarily assume additional duties through actions such as assembling the product or advising the consumer about how to safely use the product. Thus, they assume some responsibility for doing it correctly and, if they do it incorrectly, they can be held liable.

Agreements between a dealer or distributor and a manufacturer are a little different. Dealers or distributors usually have responsibilities that go beyond those of a normal entity in the chain of distribution. For example, they may agree to provide warranty service, give safety orientations and training to purchasers, provide normal maintenance, and provide repair services outside of the warranty. Also, dealers or distributors have divided loyalties because they are advocates for their customers with the manufacturer as well as representatives of the manufacturer to the retailer.

Whether a manufacturer sells to a dealer, distributor, or retailer, the relationship should be clearly defined after it has been established. Further, the contract should reflect the duties, rights, and responsibilities of all parties in the distribution chain and clearly allocate the risks between the parties.

Therefore, the contact between the manufacturer and dealer, distributor, or retailer should include a provision about who is financially and practically responsible when problems arise. If a purchaser just sells the product as received from the manufacturer, it makes sense for the manufacturer to indemnify and hold harmless that purchaser for all liability. If it is possible for the purchaser to do something that might create a safety issue, then the contract should be written to allow for the manufacturer to refuse to indemnify the purchaser if there is evidence that the purchaser did something that contributed to the injury.

Over the years, I have had problems with purchasers who wanted to be indemnified and held harmless for all product liability claims and litigation filed against them, even if their personnel did something that made the product unsafe, thus causing an accident. One example from my days as an in-house lawyer involved the sale of power tools. Sometimes, the retailer would assemble the product incorrectly. Or they would tell the customer that they can remove the guard when they get the power tool home because it just gets in the way. Another example is a retailer that placed a picture of the power tool in their advertisements, showing the product without the safety devices that were required for safe use. In all of these cases, it isn’t fair for the manufacturer to fully indemnify the retailer.

Many retailers say to manufacturers that, if you want us to buy your product, you must agree to our indemnification and hold harmless requirements. And many manufacturers do not want to raise the issue during contract negotiations. That can be a mistake if there is an incident clearly caused by the retailer’s personnel, yet the retailer still expects the manufacturer to fully indemnify them and hold them harmless.

In addition, a sales contract between a manufacturer and a retailer should include a provision regarding insurance coverage for the retailer, dealer, or distributor that will cover them in the event they are sued. The amount and type of insurance, the acceptability of the insurance company, and the amount of the deductible or self-insured retention are issues of negotiation. However, it would also be fair for the retailer, dealer, or distributor to provide insurance coverage to the manufacturer in case one of their actions caused the accident.

However, there are many issues that remain to be clarified, such as the retailer’s responsibility to 1) report incidents to the manufacturer, 2) accept returned products that have been recalled, 3) place posters in the store or in the store’s computer when a recall has been undertaken; 4) post social media information as required by the U.S. Consumer Product Safety Commission (CPSC); 5) email or mail letters to customers of the recalled product where they have contact information; 6) issue refunds; and 7) dispose of recalled products that have been returned to the store in accordance with CPSC requests.

If the manufacturer is responsible for paying for all recall costs, there should be an understanding before a recall commences about what these costs could be and how they can be minimized.

The CPSC has ramped up responsibilities for both manufacturers and retailers to communicate or attempt to communicate with consumers. Most of these new procedures involve enhanced use of social media to get the message out about the recall. This raises the question of who pays for social media, who is responsible for posting the messages and monitoring the responses, and where that information should go.

Additional issues in the post-sale area that could be included in the applicable contract involve whether the manufacturer has to pay storage costs if the recalled product or the inventory is quarantined in the retailer’s warehouse. Also, a number of retailers send reports of incidents to the CPSC on a regular basis. There should be a clear understanding between the manufacturer and the seller as to what information the retailer should obtain from the consumer, whether they should try to retrieve the product if possible and who receives it, whether the manufacturer can contact the consumer, and whether the retailer can file this report with the CPSC without first telling the manufacturer about these incidents. All of these things are important to decide during contract negotiations or before the manufacturer’s products are first sold.

Lastly, who has the responsibility to decide whether a recall or other corrective action is necessary? There can be situations where the manufacturer does not believe that a report to the CPSC or a recall is necessary, and the retailer disagrees. What happens then? The law says that both the retailer and the manufacturer have an independent duty to report to the CPSC. So, one or both entities may report. These situations may not be covered in the sales contract, but there should at least be an understanding of what each party is entitled to do in this situation.

If the manufacturer is a foreign company with no legal presence in the U.S., then the distributor or dealer is an importer and could be the party that receives notice from the retailer. In that case, someone must decide which party undertakes an investigation and reports the matter to the CPSC if a report is necessary.

Many retailers have established procedures that apply to all companies they purchase from. Therefore, the manufacturer may not be able to negotiate different procedures that would be employed in the event of a safety issue in the field. But a discussion should be undertaken, at least to ensure that the manufacturer understands what they should do and what the retailer will do.

Another complexity occurs in cases in which the CPSC wants a recall undertaken, and the manufacturer refuses to do so. In such cases, the CPSC might then issue a unilateral press release that would name the retailer. Or, in the case of a private labeled product, the press release would be issued using the retailer’s name in the headline. Again, these issues should be discussed well before they arise so that there are no disagreements about who is responsible for doing certain things and who has the right to determine what to do.

Without contracts describing the rights and responsibilities of each party to the contract, everyone is left to wonder what they have to do and what happens if a loss occurs. Some type of contract or memorandum of understanding that sets forth basic guidelines at least gives each party an idea of the parameters of the relationship.

Thankfully, online retailers have been improving their websites and procedures to deal with many of these challenges. Amazon has officially announced a number of new initiatives in this area, but other online retailers and brick-and-mortar retailers have also made improvements in the pre-sale and post-sale safety procedures they employ.

On July 25, 2023, Amazon announced a new page on their website for customers entitled “Your Recalls and Product Safety Alerts.”³ Even though Amazon proactively notifies each of its customers about product recalls and safety alerts, this page allows customers to view in one location all of these communications for products they purchased.

Amazon’s July 2023 announcement explained the use of this page by saying:

Other retailers have recall notices on their websites, but most of them cannot post these notices on the order page of the consumer unless the consumer has an established online account with that online retailer.

Last, Amazon offers a Recalls Logistics Service where they can issue refunds such as Amazon gift cards on behalf of the selling partner and manage return logistics. Of course, the manufacturer must pay Amazon for that service. Some other retailers may do that, too, but Amazon’s logistics capabilities are very extensive, making returns and replacements fairly easy.

Amazon followed up its July 2023 announcement with another one on February 14, 2024. This document, entitled “A blueprint for private and public sector partnership to improve product safety for consumers,”⁴ is a thoughtful discussion of the difficulties of providing safe products to consumers, as well as Amazon’s ideas on how to improve product safety while still selling products to consumers.

First, Amazon discussed how they can detect and prevent the sale of unsafe or defective products on their website. On this point, they said:

This blueprint does not say that Amazon will contact the manufacturer if they believe that there is a product safety issue, nor does it say that they will contact the CPSC as other retailers do. However, in 2021, Amazon established a streamlined process (called the A-z- Guarantee⁵) for resolving personal injury or property damage claims due to a defective product. This process is described as follows:

In the event of a product recall, Amazon’s product safety blueprint has a number of proposals to modernize the recall process. They say that the current regulatory requirements are not effective, noting that the CPSC estimates a 6% effectiveness rate for all types of consumer product recalls. Amazon then says:

Amazon’s blueprint also dealt with instructions and on-product warnings that Amazon believes are inadequate. To improve these communications, Amazon says:

“Similarly, we are experimenting with post-purchase messages like emails or push notifications that explain what actions to take to minimize safety risks with short, easy-to-understand usage information.”

Finally, Amazon also wants manufacturers to provide safety information digitally so it is always available, complete, can be updated as needed, and is in the customer’s preferred language.

Also, I recommend that readers review the three Amazon documents discussed in this article, as well as any other publicly available best practices in design, sales, and recalls issued by other retailers, manufacturers, or trade groups. Technology is enabling more effective and efficient ways to communicate with consumers before and after sales and should be considered by everyone. This will improve the safety of finished products, as well as products that are already in the hands of consumers.

1. See https://www.productsafetyprofessionals.org/webinar-archive for a video of this webinar that took place on February 7, 2024.
2. Ross, “Creating an Effective and Defensible Product Recall,” In Compliance Magazine, February 2024. https://incompliancemag.com/creating-an-effective-and-defensible-product-recall
3. https://www.aboutamazon.com/news/how-amazon-works/amazon-creates-new-page-to-share-recalls-for-customers
4. https://www.aboutamazon.com/news/policy-news-views/how-amazon-is-improving-product-safety
5. https://www.amazon.com/gp/help/customer/display.html?nodeId=GS3GYAU8JGDBGWH2