ProPublica Report Highlights High Cost of Free Shipping

Online Shopping

While online shopping is likely second nature to many today’s children and teens, those of us with more experience under our belts can recall the steps along e-commerce’s steady rise to dominance. What most of us remain unaware of – whether we’ve only ever known a world of online shopping or whether we have that wider perspective – is the complex and insidious way that online shopping is bound up with car accident injuries and elaborate structures of corporate limited liability.

A Brief History of E-Commerce

“In the beginning were the booksellers.” It is not biblical truth, but it had might as well be; one of the earliest and largest shifts in the modern commercial landscape occurred in the realm of book sales. Large retailers like Borders and Barnes & Noble gained footholds in cities and towns across the country, offering a vast selection of books at impossibly low prices, all in a dark-wood and cozy-chair simulacrum of the quirky independent bookstore. Reasoning that a book is a book, many of the nation’s bookworms began shopping at these big-box retailers, and small, independent bookstores across the country suffered; many did not survive.

Only the more principled, die-hard devotees of independent bookstores continued to patronize those stores despite the inescapable feeling that they were leaving money on the table by knowingly spending more on books than they otherwise had to. As a salve, many of these loyalists built up an identity and subculture around patronizing the underdog booksellers. (Against all odds, these devotees and many of the independent bookstores they are loyal to remain standing even after the tumult the commercial space has seen.) [1]

But then came Amazon, the giant killer. The big-box book stores were truly retail operations, hollowed out for the most part of a deep love of literature or a broad knowledge of the books lining their endless shelves. For the most part a retail associate at a Borders store could easily have worked at Target, Michael’s, or Home Depot; this was a retail space, not a book space. For the many readers who appreciated, but were ultimately unwilling to pay for, the learned concierges of independent bookstore staff, Borders and Barnes & Noble were appealing almost exclusively because of their low prices and wide selection. Amazon offered more of the same; because it was an online-only retailer, it paid nothing for leases in shopping centers, nothing for store managers and retail associates, nothing (as the saying goes) “to keep the lights on.” It used some of that advantage to expand its warehouse network, offering a larger and larger inventory to its customers that dwarfed even the big-box retailers’ shelves. Still other savings went into price reductions so it could sell books at impossibly low cost. And much of the rest was plowed into developing a complex e-commerce architecture.  [2]

Even for those wary of e-commerce, buying books online was appealing. The savings could be significant, and consumers knew that a book would be the same no matter whether it was purchased at the local independent bookstore, the nearby Borders, or online at Amazon; it was simply a question of how much to pay. Even adding the $5 to $10 in shipping and handling costs, buying online through Amazon was generally the cheapest option. Consumers came to trust the efficient and easy-to-use Amazon system for e-commerce, and as Amazon’s offerings expanded beyond books into consumer products of all types, shoppers went along for the ride.

Today, Amazon is a behemoth offering a startling number of products and services including:

  • A vast library of books for purchase
  • A dizzying number of consumer products
  • E-books
  • Music and video streaming
  • Cloud data storage to name just some of its facets.

The Amazon gift card has become like a second form of legal tender, offered commonly as an incentive for participating in a survey or given as a gift that cannot miss the mark. Amazon’s signature service is Prime, for which members pay an annual fee and in return gain access to premium versions of many of Amazon’s services. This includes the Holy Grail of e-commerce: free shipping.

The Costs of Free Shipping

Today, consumers expect online shopping to offer the lowest price on goods, shipped quickly to them at no additional cost. The history of e-commerce detailed above is a helpful reminder that things were not always this way. In the earlier stages of the market, there was a clear trade-off between the savings offered by online retailers and the added cost of shipping and handling and the waiting time for delivery. Over time online sellers have maintained this core markdown on the primary transaction while also cutting delivery times and expanding the prevalence of free shipping.

Amazon whetted the consumer appetite for free shipping by getting buyers to reach a certain threshold of goods – originally for orders of $25 or more. Then its Prime service allowed members to buy into free two-day shipping on all purchases. Other retailers have done their best to keep pace and innovate in new ways, including with overnight shipping. This has all been to the good from the consumers’ perspective, but as economists say, “there is no such thing as a free lunch.” [3]

Amazon originally relied on traditional couriers – FedEx, UPS, and the United States Postal Service – to transport its packages. As pressure mounted to reduce delivery times and costs, Amazon began experimenting. One day autonomous vehicles and package-hefting drones may present the end-stage of the e-commerce revolution, but we are not there yet. A recent ProPublica report indicates that we are in a shockingly perilous middle period.

To square the circle of free shipping, Amazon and many of its competitors have begun relying on vast networks of shipping companies. In an effort to solve the “last mile problem” – the challenge of quickly and cost-effectively delivering packages not just to regional warehouse hubs but to individual apartments and doorsteps – these mega-retailers have begun contracting with shipping companies. The contracts typically provide that the courier is entirely liable for any personal injury claims that arise as its trucks traverse the fabled “last mile” and bring packages to their destinations; the deep pockets of Amazon and others are supposedly off-limits.  [4]

But those shipping companies often contract with still-smaller companies, perhaps as small as a pair of trucks and a handful of drivers. As a strict matter of corporate liability, each of these companies is an entity unto itself; if a driver is involved in a deadly delivery truck accident, the driver may be personally liable and the driver’s employer may also be vicariously liable, but as a general matter liability would not extend to the company on the other side of the delivery contract. With retailers like Amazon secluded one, two, or even more levels up this complex ladder of limited liability, those injured or killed in these increasingly common delivery truck crashes are often left without a defendant who can make them whole again. [5]

It may strike readers unfair that some corporate formalities can allow a multi-multi-billion-dollar enterprise like Amazon to escape liability for serious injuries or even death in delivery truck accidents caused in pursuit of its free-shipping ambitions. But limited liability has been a cornerstone of our economic system for centuries, and the legal system has found ways to achieve a modicum of fairness even despite the elaborate fictions of limited liability. The key question in deciding whether a delivery truck driver was an “independent contractor” relative to Amazon is how closely Amazon directed the driver’s activities.

If you run a painting company, you tell your staff not just what color the customer ordered but also what brand of paint to use, how thickly to apply it, and how much precaution to take to avoid accidental damage or injury; your staff are your employees. But if you are the homeowner, you have told the painting company what color you want, when you want the job done, and how much you are willing to pay; the company is an independent contractor. With these two examples in mind, you can see the sense in limiting liability in the event that a ladder falls and breaks a neighbor’s window – the painting company should be liable, but the homeowner should not.

Amazon and its free-shipping rivals would say the same about their use of delivery contractors, though it is not a perfect apples-to-apples comparison. The ProPublica report indicates that Amazon has gone to significant lengths to deny or even obscure its role in some 60 delivery truck accidents in recent years. While Amazon may be several degrees removed from the negligent delivery drivers from a contractual or corporate standpoint, there is much evidence to suggest that Amazon gets involved in the details of drivers’ activities beyond the degree one would expect in an independent-contractor arrangement. Amazon tracks drivers’ progress and often directs their routes, even down to the turn. This level of detailed control and direction may be adequate to convince a court that Amazon should be made defendant in some of these delivery truck accidents. The unresolved question is whether victims of these tragedies will know to ask about Amazon’s involvement and whether they will consult sufficiently experienced personal injury lawyers who know what questions to ask about Amazon’s involvement.

[1] https://hbswk.hbs.edu/item/why-independent-bookstores-haved-thrived-in-spite-of-amazon-com

[2] https://www.axios.com/barnes-and-noble-book-stores-sale-amazon-effect-4f2753d2-818c-49d1-878a-60f0c3a5b3f7.html

[3] https://www.vox.com/recode/2019/5/3/18511544/amazon-prime-oral-history-jeff-bezos-one-day-shipping

[4] https://features.propublica.org/amazon-delivery-crashes/how-amazon-hooked-america-on-fast-delivery-while-avoiding-responsibility-for-crashes

[5] https://features.propublica.org/amazon-delivery-crashes/how-amazon-hooked-america-on-fast-delivery-while-avoiding-responsibility-for-crashes

Benson and Bingham