By Alexandra Berzon
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.
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.
Write to Alexandra Berzon at alexandra.berzon@wsj.com
(END) Dow Jones Newswires
December 05, 2019 11:42 ET (16:42 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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