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