New Amazon FBA Product Safety Rules: What it Means for Third-Party Sellers

The U.S. Consumer Product Safety Commission (CPSC) has recently taken decisive action against Amazon regarding hazardous products sold through its platform. In a unanimous decision, the CPSC ruled that Amazon is a “distributor” under the Consumer Product Safety Act (CPSA), thereby making it legally responsible for defective and/or dangerous items sold by third-party Sellers via its Fulfilled by Amazon (FBA) service. Amazon must notify purchasers and the public about the hazards, offer refunds or replacements, and take remedial actions to remove the dangerous products from consumers’ homes (recalls).

This ruling affects over 400,000 potentially dangerous products, including malfunctioning carbon monoxide detectors, unsafe hairdryers, and children’s sleepwear, violating flammability standards.

What it Means for Third-Party (3P) Sellers

Amazon will not want to be held responsible for any damages caused by products fulfilled by FBA nor the subsequent lawsuits and claims filed against them. So we expect a mass cleansing of the product catalog, which can be deleterious for Sellers of such products. Still, this shift could benefit Sellers who already comply with safety regulations, as non-compliant competitors might face removal, improving the marketplace’s overall safety, trustworthiness, and profitability. However, it also means that getting new products vetted and approved for sale on the marketplace could get more complicated and time-consuming. Carriers such as UPS, FedEx, and USPS have issued new and updated guidelines on hazmat shipping.

The Rub

If a Seller’s products are unsafe, Amazon may swiftly remove them from the marketplace and halt sales. The enforcement of such policies could hurt third-party Sellers who might unknowingly sell non-compliant products, leading to loss of revenue and damaged reputation.

Amazon already has an Unsuitable Inventory Policy that aims to crack down on items considered unsafe, illegal, or otherwise unsuitable for sale on the Amazon platform to protect customers’ safety and maintain trust. This new action by the CPSC is a natural extension of Amazon’s existing philosophy, but making it mandatory rather than simply accepting that Amazon’s self-imposed and self-regulated policy is sufficient to protect consumers from dangerous goods. The Unsuitable Inventory Policy has recently impacted hundreds, possibly thousands of FBA Sellers. Seller Accounts have been deactivated, and Amazon seized and/or disposed of much of the inventory, taking a guilty-until proven-innocent approach. Without the inventory in hand, these Sellers aren’t able to sell on non-Amazon channels, effectively destroying businesses. For Sellers knowingly violating the FBA policies, that’s the risk they took. For Sellers forced into insolvency through no fault of their own, it’s scary to appreciate how much power Amazon has and how little recourse Sellers have.

Seller Agreements Will Need to Evolve

Sellers will likely receive more explicit guidelines on product safety requirements and recall procedures, ensuring they know exactly what standards they must meet to avoid penalties or product removal.

Perhaps more importantly, Amazon may raise fees for storage, fulfillment, and compliance management to offset the cost of stricter safety oversight. Sellers using the FBA service could see higher operating costs as Amazon enforces more rigorous processes. Smaller Sellers might struggle with the increased compliance costs and operational burdens, potentially risking their livelihoods.

Have a Plan to Mitigate Risk

To be unequivocally trusted by consumers and avoid unscrupulous activity, Amazon has historically taken a shoot-first and ask-questions-later approach to anything that could damage its customer relationship. This allows Amazon to arrest harmful activity while investigating situations and resolutions implemented.

While a reasonable strategy for consumers, it can be brutal to the business health of brands and resellers selling compliant products. However, it is unfairly included in adverse actions taken by Amazon. To ensure business continuity, Sellers should have alternative fulfillment strategies in place, even if dormant, that can help mitigate these risks. This new ruling does not govern seller-fulfilled orders because Amazon is not the ‘distributor’ for non-FBA fulfillments.

One example would be to have the warehouse infrastructure, inventory, and staff available that can take over the fulfillment of Amazon orders in a pinch (it is this author’s opinion that ALL Amazon 3P Sellers should be selling FBM, Fulfilled by Merchant, aka MFN, Merchant Fulfillment Network because it increases sales by increasing discoverability of products).

If in-house operations are not feasible, partner with a highly rated 3PL or 4PL to quickly ramp up Amazon FBM fulfillment. Third-party logistics companies can often receive inventory faster than FBA and cost less, besides having far fewer hassles.

If the Prime badge is important, partner with a fulfillment services provider that can support the Seller Fulfilled Prime (SFP) Fulfillment Program.

Consumer Protection is the Focus

The decision is rooted in consumer safety and aims to prevent dangerous products from reaching consumers, but it also establishes Amazon’s accountability to help remediate the situation when they do.

And while this new ruling signals a shift toward greater scrutiny of online marketplaces and their role in ensuring product safety, it’s also a wake-up call for all Amazon Sellers. It’s not just about avoiding penalties—protecting your customers and building a sustainable, trustworthy business and brand.