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Facebook is taking on Amazon and eBay with its new 'Shops' feature. The risks to its reputation are greater than ever. (FB)

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  • Facebook is adding shops to its social network where businesses can sell goods to users.
  • The move will help diversify Facebook's revenue and capitalize on a huge wave of online shopping caused by the pandemic.
  • But there are major risks.
  • If Facebook fails to properly police the shops on its platform, the physical goods sold could do serious harm to people.
  • The company is unlikely to be legally liable for any dodgy, dangerous, or illegal goods sold — but they could do huge damage to its reputation.

Facebook is gearing up to go toe-to-toe with Amazon. It's high risk — and high reward.

On Tuesday, the Silicon Valley-headquartered social networking giant announced Facebook Shops — a new feature for Facebook and Instagram that will allow businesses to create digital storefronts and list catalogs for products for sale through the social network.

It's a move that takes Facebook into more direct competition with long-established online shopping platforms that allow third-party sellers, from the behemothic Amazon to eBay and crafts-focused Etsy.

The new feature may help to diversify Facebook's business and lessen its reliance on advertising revenues, at a time of immense economic instability and a cratering in online ad spend — while also helping Facebook to capitalize in the sudden boom in online shopping driven by coronavirus lockdowns.

But the ambitious effort brings new dangers to Facebook's business. The $607 billion company has been beset by years of scandals, many centering around its failure to properly police its platform and curb malicious or illegal activity — from Russian agents' dissemination of divisive propaganda and misinformation in the run-up to the 2016 US presidential election to Facebook's role in the spread of hate speech that fueled genocide in Myanmar.

By facilitating sales of random products by unvetted businesses, Facebook is at risk of being facing all-new types of scandals — being complicit in the distribution of dodgy, dangerous, or illegal goods — unless it takes a far more proactive approach to moderation.

facebook shops

Online shopping platforms have a spotty track record

Previous investigations into other online shopping platforms have found their attempts to police themselves severely lacking.

In August 2019, for example, The Wall Street Journal reported that it had "found 4,152 items for sale on Amazon.com Inc.'s site that have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators—items that big-box retailers' policies would bar from their shelves. Among those items, at least 2,000 listings for toys and medications lacked warnings about health risks to children."

The risks that moderation failures pose for e-commerce platforms can be uniquely high. While there are of course exceptions, most rule-violating content on Facebook doesn't put users at risk of imminent harm. If someone sees a racist post on Facebook, they'll be offended by it — but it's unlikely to physically injure them. In contrast, if a Facebook users buys a toy for their child off a Facebook Shop that uses lead paint, then it puts their child's health at very serious and immediate risk.

In an interview with Business Insider ahead of the launch, Dan Levy, Facebook's VP of ads and business platform, said Facebook was taking moderation of the Facebook Shops very seriously. "Obviously, integrity issues are really core to everything on Facebook. Whether its commerce or content, we take this integrity challenge very seriously. We have a very built-out program for already checking commerce ads on Facebook, which will be expanding similar types of policies, enforcement into shops as well."

Facebook may avoid legal responsibility — but not blame

Facebook is unlikely to face direct legal liability for the products that go on sale on the social network.

By acting as an intermediary rather than selling anything itself, it can absolve itself of legal responsibility for what appears, similar to how it evades legal blame for the other malicious and illegal content that gets posted on the social network (or how Amazon dodges lawsuits when products sold through its store go wrong).

But even if that means Facebook avoids legal ramifications for the consequences of dodgy products sold through its shops, that doesn't mean it would escape public condemnation. (Also: Section 230, the US law that protects it from it when from the illegal content on its platform, is under renewed political scrutiny.) The company is leaning hard into its coronavirus response to help resuscitate its image — other initiatives include a $100 million grant program for small businesses, a Coronavirus Information Center in its core app, and new video chatrooms for people to hang out in virtually — but a highly publicized scandal about dangerous goods sold on the app could be immensely damaging to its reputation. 

Facebook can argue until its blue in the face that it's not technically responsible for the malfunctioning play equipment sold through its services — but that might not do it much good in the court of public opinion if it's arguing against the parents of a dead child.

Got a tip? Contact Business Insider reporter Rob Price via encrypted messaging app Signal (+1 650-636-6268), encrypted email (robaeprice@protonmail.com), standard email (rprice@businessinsider.com), Telegram/Wickr/WeChat (robaeprice), or Twitter DM (@robaeprice). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by standard email only, please.

SEE ALSO: Facebook's $400 million Giphy acquisition is part of an unrelenting startup shopping spree that's practically daring antitrust regulators to try and stop it

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