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  • Since Amazon bought Whole Foods for $13.7

  • billion in 2017, it's become an ever more popular place to buy food items.

  • With Amazon Fresh, Prime members get groceries delivered for free in two

  • hours from local Whole Foods stores in select cities.

  • But outside Amazon Fresh, there's an entire section of food sold through

  • Amazon's regular e-commerce platform.

  • It's called Grocery and Gourmet, and it launched in 2006 with 14,000 dry

  • grocery products available.

  • Today, it has hundreds of thousands of items sold by millions of

  • third-party sellers. Chances are you can find your favorite variety or

  • obscure flavor on Amazon.

  • And if you're a Prime member, many of them will have free one-day

  • shipping. But there's a downside to the convenience created by Amazon's

  • huge marketplace. Some of these food items sold through third-party

  • sellers are arriving expired, stale or tampered with.

  • That focus on selection, relentlessly offering more stuff, allows those

  • expired or unsafe foods to fall through the cracks.

  • I do buy my creamer there because I can't get it in the store where I live

  • now. It was chunky and curdled and that's when I noticed the expiration

  • date was I want to say two or three months before.

  • It was shocking. They m ailed us actually like over a year old brownies.

  • I've never experienced anything like that.

  • Like, it tasted disgusting.

  • It tasted like, I don't know, cardboard.

  • A CNBC analysis found expired hot sauce, beef jerky, granola bars,

  • Doritos, coffee creamer and baby food.

  • We wanted to find out why expired food ends up on Amazon and what's being

  • done to cut back on the problem.

  • Amazon currently just has the potential for a massive liability, and

  • they're certainly trying to take steps to clean things up and make the

  • products that are being sold through the platform more reliable.

  • To understand how expired food gets on the Amazon marketplace, it's

  • crucial to understand who is selling it.

  • Consumers have this false sense of security that because it's coming from

  • Amazon, it must be OK.

  • But what consumers really have to know is they're not buying from Amazon.

  • They're buying from somebody else.

  • Amazon's algorithms work behind the scenes to automatically suggest a

  • seller when you shop. These listings are actually official brand names

  • appearing there. So it looks really official that it's coming from like,

  • let's say, Kraft. People don't know that there's a big third-party

  • marketplace right behind the listing.

  • While Amazon sells its own groceries through its Fresh program, the

  • Grocery and Gourmet section is mostly made up of products sold by third

  • parties. 3PM Solutions, a data analytics firm that specializes in

  • e-commerce, analyzed Amazon's 100 best-selling food products for CNBC in

  • October. Of the sellers that had over 1,000 customer reviews in the last

  • year, 40% had more than five customer complaints about expired goods.

  • Almost four months later, 3 PM found that all these sellers are still

  • active and at least 50% of them have had more customer complaints of

  • selling expired products since the initial story ran in October.

  • I would hope that Amazon is reading these stories in the news and

  • understanding that third-party sellers are abusing their platform and

  • selling these types of products and doing everything possible to clean it

  • up and start to protect consumers better.

  • In a statement, Amazon told CNBC, "We require selling partners to abide by

  • strict product quality guidelines and our teams have robust practice

  • systems in place to prevent expired goods from being shipped to

  • customers." Amazon told CNBC it will terminate bad actors for violating

  • its policies around expired foods.

  • But the question that we should be asking is: how often are you checking

  • to see if these sellers are following your guidelines?

  • Amazon told CNBC that it happens in very isolated incidents.

  • 3 PM says it's noticed a pattern among 150 million customer reviews of

  • more than 2 million third-party sellers.

  • Sometimes you're buying from very unprofessional sellers that are

  • literally just trying to unload product and make a quick buck and they

  • don't care about your safety.

  • Among the recent food products that customers say arrived expired or

  • tampered with are various coffee creamers, Doritos, Fiji water bottles and

  • Similac baby formula.

  • In order to be eligible for its fulfilled by Amazon program, food and

  • beverage products must have a minimum remaining shelf life greater than 90

  • days. Amazon says items within 50 days of the expiration date at the time

  • of arrival at a warehouse will be marked for disposal by Amazon.

  • Bulk items must also include extra time for consumption.

  • Amazon cites an example.

  • A 240-count bottle of daily supplements must have a remaining shelf life

  • of 240 days plus an additional 90 days at the time of check-in at the

  • fulfillment center. And Amazon takes product safety really seriously.

  • The problem is just how big Amazon is and it just is really difficult to

  • police a system that big effectively.

  • Amazon says it has millions of sellers worldwide, including at least

  • 800,000 in the U.S.

  • Third-party sellers make up 58 percent of merchandise sold on Amazon.

  • Amazon as a company, they have a $1 trillion market cap now.

  • A big part of their growth has been opening up the third-party

  • marketplace. That's the only way you can get that volume and that huge

  • growth as a company.

  • The thing is, that growth needs to be tempered for the reasons of safety

  • for the consumer. And this issue is more and more important as a growing

  • number of shoppers head online for their groceries.

  • A recent report by Nielsen and the Food Marketing Institute found online

  • food and beverage sales will top $143 billion by 2025.

  • And last year, 44 % of U.S.

  • households purchased food and beverages online, up from 39 % in 2017.

  • I know of sellers who've sold chips, crackers that are expired, ramen

  • packets that are expired and also flavored waters.

  • Although many of these grocery items are sold by third parties, Amazon

  • gets a cut of each sale and provides the selling platform, which makes

  • culpability a hot topic.

  • It's not just a flea market, a local flea market where a few goods are

  • going to be sold. Folks can go on there and sell at scale expired items,

  • items that can harm consumers.

  • And ultimately, Amazon needs to be liable for that harm that's caused in

  • order to induce Amazon to take the appropriate action to protect consumers

  • from those types of sellers.

  • So where are third-party sellers getting expired merchandise?

  • The short answer is: it's usually changed hands a few times before it ends

  • up on Amazon. So-called banana box stores sell pallets of goods deemed

  • unfit for sale at normal grocery stores.

  • Think overstock, discontinued items, returns or inventory that's been

  • damaged, like when a pallet gets knocked over.

  • If you go to a banana box store, probably two-thirds of the stuff in the

  • store is expired.

  • Closeout sales and liquidation warehouses are other common sources.

  • For example, a U.S.

  • company cancels an order, so the overseas manufacturer sells it at a

  • discount to a liquidation company who then sells it on Amazon.

  • Another example: even though Starbucks closed all its 379 Teavana stores

  • in 2018, you can still buy Teavana sugar and fruit tea on Amazon in 2020.

  • From sellers who purchased it from closeout sales.

  • Now the problem with passing visual inspection for anything that's

  • liquidation or that has some sort of broken supply chain is that no one

  • knows how it was stored in the meantime.

  • You don't know if it got overheated.

  • You don't know if it got dinged and now there's a hole in the seal.

  • You don't know if it was too cold.

  • Plastic gets brittle and cracks when it's cold.

  • Sellers can also stock up on seasonal items that become wildly popular

  • when normal grocery sellers take it off the shelves.

  • You would be amazed at what people will pay for that package of Oreos that

  • they can't get anymore.

  • So something that was originally $3.50,

  • these sellers had people buying for $25 and $30 a package.

  • So they would ignore the best-buy dates and ship the product.

  • And then there's dumpster diving.

  • People going to Trader Joe's and going through the dumpster and finding

  • products that they've thrown out and reselling them on Amazon.

  • Brand owners have a real problem here in the sense that once somebody gets

  • an expired food product and has a problem with it, maybe they get sick or

  • it's just a horrible taste, they've probably lost a customer for life at

  • that point. An online Amazon policy says all sellers must place a label

  • showing both the manufacturing date and expiration date in at least 36

  • point font so warehouse workers can easily spot the dates on each box or

  • bundle as well as on each individual item inside the box or bundle.

  • So then how does food past its best-buy date actually make it out the door

  • of Amazon's warehouses?

  • Unfortunately, a very large percentage of third-party sellers aren't even

  • aware of this particular rule.

  • And even if they are, they tend to not follow it.

  • And Amazon also does not always enforce its own rules.

  • Simple mistakes are bound to happen at this scale.

  • Pickers and packers in the warehouses are working at high speeds to keep

  • up with Amazon's 2019 promise to make one-day shipping the default for all

  • 100 million-plus Prime members.

  • In January 2020, Jeff Bezos told shareholders that more people joined

  • Prime last quarter than ever before.

  • So if it's hard for the guy doing pick and pack who's picking your order

  • and sending it out to you, he might not notice that the item is expired

  • because it's printed in really small type or whatever the case might be.

  • Amazon has more than 175 warehouses across the world, covering 150 million

  • square feet of space.

  • Product is shipped to all these warehouses.

  • It's trucked everywhere that one seller owns the product.

  • So sometimes the older units have been sold by Amazon without the seller

  • meaning to take part in that behavior.

  • And sometimes problems with food items are caused by how Amazon stores and

  • handles them. One of the things that we found was like oatmeal next to

  • really smelly Tide.

  • And I know like Tide has a very strong chemical smell, especially like,

  • you know, the big jugs of it.

  • And oatmeal is one of those grains that absorbs flavor.

  • And so sometimes , there's nothing wrong with it inherently, it doesn't

  • damage the oatmeal, but you might have Tide flavored oatmeal, for example.

  • When Congress passed the Food Safety Modernization Act in 2011, Rachel

  • Johnson Greer's job at Amazon was to bring its food storage and handling

  • procedures into compliance.

  • Some of the temperatures were reaching over 120 degrees inside the

  • facility and we just did spot checks throughout the facility to see

  • different things. That particular one, the top shelf, was a giant tub of

  • gummies that had all melted together because it was 120 degrees.

  • And so it was literally a melted tub of gummies.

  • Another issue: returned food items can get mistakenly entered into the

  • wrong category and end up being resold.

  • If someone screwed that up, either the seller screwed it up or Amazon

  • screwed it up and assigned it to the wrong category, t hen it wouldn't

  • follow the food process.

  • So Amazon has a really solid food process where if a return comes in it

  • should never be put back on the shelf, right?

  • Someone could have opened it.

  • Someone could have eaten part of it.

  • Someone could have gotten it gross.

  • Amazon workers can also make mistakes when manually entering expiration

  • dates. That's the problem with the system, is that if there's anything

  • that gets manually keyed in wrong, if anything gets received incorrectly,

  • then things can still sell that aren't really supposed to be selling.

  • And occasionally bad actors fake a later expiration date.

  • I don't think that anyone at Amazon would look at that in any detail

  • because the policy does require stickering over manufacturer dates.

  • And then there's the whole slew of products that are not fulfilled by

  • Amazon. So that's when you buy from a third-party seller and they ship it

  • to you directly instead of Amazon having any part of the shipment process.

  • In that case, Amazon doesn't have any visibility to that product.

  • In a statement to CNBC, Amazon said, "We also use a combination of

  • artificial intelligence and manual processes to monitor over 20 million

  • pieces of customer feedback we receive weekly for any concerns.

  • If one arises, we work quickly to investigate, take the appropriate

  • actions and use this information to improve our systems.

  • Appropriate actions include warning, suspending or terminating a bad

  • actor's account. If customers have a concern with a potentially expired

  • product, we encourage them to contact our customer service directly for a

  • full refund of their purchase."

  • In the case of the spoiled creamer, Amazon did offer to compensate

  • Atkinson after she spoke to CNBC in October.

  • Wilson also received a refund for her year old brownies.

  • It makes me think twice and so we haven't ordered anything since then.

  • In another statement, Amazon said, "With the A-to-z Guarantee, customers

  • are always protected whether they make a purchase from Amazon or a

  • third-party seller." Former Amazon employee Rachel Johnson Greer explained

  • how the process works.

  • A seller will get a warning from Amazon saying a customer complained and

  • said that they received an expired item from you.

  • Explain yourself. And you get a chance to do what's called an appeal.

  • And then whoever at Amazon receives that says, "All right, legit, you're

  • back on. Thank you." Or, "Absolutely not.

  • That was a terrible appeal. Go away."

  • Amazon says in 2018 it spent more than $400 million and employed 5,000

  • people to fight fraud and abuse.

  • A year ago, Amazon also launched Project Zero, allowing certain

  • trademarked brands to directly remove third-party sellers who are

  • tarnishing their reputations.

  • When an item expires, a rguably it's been altered in some way.

  • It could have spoiled.

  • So at that stage, that's when trademark owners and brand owners can jump

  • in and do something about those listings.

  • But at this point, the damage could already be done.

  • Who knows how many hundreds, if not thousands of people have received the

  • expired item and had a negative experience with your branded product.

  • One way customers can avoid b uying expired items is to read the reviews.

  • But Amazon's platform can make it confusing for customers to pinpoint the