Amid The Coronavirus Outbreak, Retailers Try To Combat Price-Gouging Online
Joan Verdon
Joan VerdonSenior Contributor
Retail
A box of tissues and a bottle of Purrell hand sanitizer sit on the desk in the Senate Reception Room in the Capitol on Tuesday, March 3, 2020.
Fear of the coronavirus is causing shortages of hand sanitizer, resulting in price-gouging of Purell ... [+] CQ-ROLL CALL, INC VIA GETTY IMAGES
Shortages of hand sanitizer and face masks mean state laws designed to protect consumers in the aftermath of hurricanes and other natural disasters may be used to fight a new threat: Purell price-gouging.
More than two-thirds of the states have laws preventing price-gouging of necessities such as gasoline or bottled water during a state of emergency. Now, lawmakers are looking at whether those regulations can be applied to products in short supply due to coronavirus fears.
While there have been reports of brick-and-mortar stores hiking prices, such as the Michigan retailer reportedly selling individual face masks in Ziploc bags for $10 apiece, the bigger problem is online, where in some cases algorithms automatically boost prices as demand surges.
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Amazon and other online marketplaces that use third-party sellers are being criticized for examples of extreme price-gouging on their sites, such as $100 bottles of hand sanitizer or face masks marked up 500%.
While third-party sellers are independent merchants on the Amazon site, consumers are asking on social media whether Amazon is benefiting from the price-gouging because it gets a commission on the third-party sales.
For Amazon, and any other retailers accused of price-gouging, their biggest risk could be in the court of public opinion.
Amazon has 5 million sellers on its site, and 50% of its sales are by third party sellers.
Amazon has acted quickly to remove examples of price-gouging, and also has shut down sellers promising fraudulent COVID-19 cures. It released a statement that shows it understands how screenshots of overpriced Purell could create a backlash against Amazon, not the individual third-party seller.
“There is no place for price gouging on Amazon,” a company spokesperson said in a statement to Forbes.com. “We are disappointed that bad actors are attempting to artificially raise prices on basic need products during a global health crisis.” The company said it has blocked or removed “tens of thousands of offers” and that it will actively monitor the site and remove any new offenders.
E-commerce, where prices can rise and fall automatically based on what the competition is doing and market demand, has taken price-gouging to a new level.
“Retailers who practice dynamic pricing need to monitor algorithms to ensure that prices don’t skyrocket,” said Kelly Lynch, retail solutions manager at ActiveViam, which provides pricing technology to retail and financial brands.
While a crisis such as the COVID-19 outbreak presents an opportunity for retailers in terms of increased demand, “ultimately retailers should understand that in the long run this will hurt goodwill and relationships with the customer,” if they use the increased demand to take advantage of customers, said Lynch.
States in the past have acted aggressively to crack down on retail price-gouging, but the prosecutions typically involved brick-and-mortar stores, gasoline stations or hotels.
After Hurricane Sandy hit New Jersey in 2012, that state accused four hotels, three gas stations and a hardware store of price-gouging. The businesses settled with the state and paid $282,844 in fines.
Florida prosecuted price-gougers after Hurricane Irma and Texas did so after Hurricane Harvey.
Most of the state laws prohibit price-gouging during a declared state of emergency. Typically retailers are allowed to raise prices by no more than 10% during the emergency.
The Michigan Attorney General Dana Nessel warned Tuesday that she will “bring the hammer down on any person or business that uses this public health threat to feed their own greed.”
“Whether you run a national chain, a local store or are just looking for ways to get rich on eBay, the expectations are the same: follow the law,” Nessel said in a statement reported by Michigan news site MLive.com.
A New York state senator said Tuesday he will introduce legislation to expand New York’s price-gouging law to cover public health emergencies and prohibit excessive markups on medical supplies.
Amazon third-party sellers have been debating the price-gouging accusations on the Amazon sellers forum pages, with a number arguing that the price hikes simply reflect the laws of supply and demand.
But as Dana Radcliffe, senior lecturer of business ethics at Cornell’s SC Johnson College of Business, points out, the problem with that argument is “in emergencies where critical supplies are scarce, the conditions of a ‘free and fair market’ don’t exist—since the buyers don’t have options.”
“They cannot simply buy at lower prices from competing suppliers,” he said. “Rather the sellers are in the position of monopolists who can demand whatever price they want because their customers have no alternatives. It’s such exploitation of fellow citizens’ vulnerability that makes price-gouging unfair—and frankly unpatriotic.”
It’s also bad for business, because consumers remember, after the crisis has passed, which gas station, or supermarket, or e-commerce retailer, doubled or tripled prices on essential items.
WTF? First, who has access to testing? You think these cacs making it a priority to test black people? Which black people have the connections to get tested? They ain't even testing nurses who are fucking treating this. It's just so much fucking ignorance being spread about this shit. Asians aren't white, and this shit been knocking them on their ass. Let me guess, they'd die off too. Donovan Mitchell seemed to have no problem catching that shit. Rudy didn't either.
