The U.S. Consumer Product Safety Commission (CPSC) has held e-commerce giant Amazon Inc. (NASDAQ:AMZN) accountable for recalling over 400,000 hazardous products sold on its platform.

What Happened: On Tuesday, CPSC issued a decision and order against Amazon, categorizing the e-commerce behemoth as a "distributor" of defective or unsafe products.

The company is legally bound to recall over 400,000 products, including faulty carbon monoxide detectors, hairdryers without electrocution protection, and children's sleepwear that violates federal flammability standards.

"The Commission determined that these products, listed on Amazon.com and sold by third-party sellers using the Fulfilled by Amazon program, pose a 'substantial product hazard' under the Consumer Product Safety Act (CPSA)," a press release by the commission read.

Amazon was found to have inadequately informed the public about these hazardous products and did not take sufficient measures to encourage customers to return or destroy them, according to the CPSC.

The decision and order follow a three-year-long administrative complaint against Amazon, alleging the distribution of products posed a substantial hazard.

The e-commerce giant contended that it was not acting as a distributor and was therefore not responsible for public protection actions. The company also claimed that sending messages to initial purchasers about "potential" safety issues and offering credits were sufficient to remedy the hazards.

However, both the agency and an administrative law judge disagreed with Amazon's assertion, finding the retailer's actions "inadequate to protect the public."

Amazon is now required to submit proposed plans to notify people about the hazardous products and to remove them from circulation by incentivizing their return or destruction, the agency said. Amazon expressed disappointment with the CPSC's decision and plans to appeal the ruling in court.

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Why It Matters: Amazon is currently gearing up to report its second-quarter earnings on Thursday. Analysts predict significant growth in sales and cloud services.

BofA Securities' analyst Justin Post forecasted Amazon's Q2 revenues to hit $149 billion, 40 basis points above Wall Street's expectations. AWS was expected to grow at 18% year-over-year, beating the Street's 17% estimate.

Goldman Sachs analyst Eric Sheridan has also previewed Amazon's upcoming second-quarter operating results and raised his 2025 GAAP operating income estimate to 8% above the Street's projection, citing potential margin improvements.

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