Amazon tells sellers its price gouging policy could cause 'confusion' as unfair suspensions increase — just a week after 32 attorneys general called for action (AMZN)


Amazon warehouse, New Jersey

  • Amazon told sellers in a note this week that its price gouging rules could be confusing given the different state laws.
  • The note comes a week after 32 US attorneys general told Amazon to fix price gouging activities on its marketplace.
  • Amazon’s always had a “zero tolerance” policy against sellers who exploit “an emergency by charging excessively high prices on products and shipping.”
  • But sellers say Amazon has now become too aggressive, often suspending sellers and products that are not engaged in price gouging.
  • Amazon’s spokesperson said the note was meant to provide “even more detailed guidance” on price gouging, but sellers say the guidelines on gouging are still unclear.
  • Visit Business Insider’s homepage for more stories.

Just a week after 32 US attorneys general told Amazon to fix price gouging on its site, Amazon acknowledged in a letter to sellers that its system may be difficult to understand. But sellers now say Amazon is overcompensating and pushing too hard, leading to a surge in unfair product and seller suspensions.

In a note sent to sellers on Wednesday, obtained by Business Insider, Amazon said its policy over what products or sellers get suspended for excessive price increases could lead to a “confusion” because it looks into a number of different factors. Amazon’s system, which is mostly automated, has been kicking off groups of sellers and products from its marketplace lately for profiteering on items like hand sanitizers and face masks during the coronavirus pandemic.

“We recognize there may be some confusion as to what may trigger offer removal or account suspension for price gouging under this policy,” Amazon said in the note.

Amazon said that it’s difficult to set a one-size fits all policy because states have varying rules over price-gouging. For example, some states have a 10% ceiling on price increases during a national emergency, while others may have more vague guidelines, like banning unconscionably “excessive” price increases without a fixed cap, it said.

“Our systems attempt to account for these variations in state law while recognizing that the costs of many goods are increasing due to the worldwide effects of the COVID-19 pandemic,” Amazon said in the note.

Amazon’s response to sellers shows the difficulty in cleaning up its marketplace of bad actors that try to take advantage of consumers in need of essential items during the pandemic. As demand for online shopping has increased amid COVID-19, some sellers have set unreasonably high price increases on not just essentials but also everyday grocery products, like rice and milk.

Amazon has always had a “zero tolerance” policy against sellers who exploit “an emergency by charging excessively high prices on products and shipping.” To combat the surge in price gouging, Amazon recently said that it had suspended over 3,900 US sellers for violating its fair pricing policy and removed over half a million products due to coronavirus-based price gouging. 

Amazon’s representative told Business Insider in an email that the note was meant to provide “even more detailed guidance” on price gouging, as laws vary by state. Sellers who feel they were unfairly suspended should reach out to Amazon directly for a separate investigation, the spokesperson said.

“Amazon has always prohibited price gouging,” the spokesperson said. “Our objective is to protect customers from clearly egregious price increases.”

Price gouging is just one of the many challenges facing Amazon as the coronavirus pandemic continues to put a deeper strain across its business. The slowing supply chain has delayed shipments of some products by a month, while warehouse workers have staged walkouts demanding better safety measures at their facilities. Meanwhile, Amazon executives have come under fire following Thursday’s report by Vice that showed them engaged in an internal discussion to smear a fired warehouse employee who led one of the strikes last week.

Finding a ‘middle ground’

The note to sellers is Amazon’s first response to sellers following last week’s letter signed by US attorneys general in 32 states, including Pennsylvania, Connecticut, and California, that demanded Amazon and other retailers like Walmart come up with stronger protective measures to prevent price gouging. In the letter, the attorneys general urged for better policies and restrictions, and a new “fair pricing” portal where consumers can directly report price gouging incidents.

But some sellers say Amazon has now become too aggressive in enforcing its anti-price gouging policies, often unfairly suspending sellers and products that haven’t engaged in any price manipulating activities.

Ed Rosenberg, who runs an online seller group called ASGTG, told Business Insider that there’s been significant increases lately in sellers who got suspended, including those who haven’t raised prices all year. He said Amazon seems to be struggling to find the right balance in enforcing its price gouging policy, given the complex nature around it.

“Amazon seems to have gone to the other extreme blocking items and suspending accounts that are not close to price gouging,” Rosenberg said. “They need to find a middle ground.”

For sellers, it’s difficult to keep track of every state’s different price gouging rules. For example, California and New York prohibits 10% price increases in national emergencies, while Pennsylvania and Kansas have a price cap of 20% and 25%, respectively. Texas, meanwhile, doesn’t have a hard cap.

Amazon’s vague guidelines are also a challenge, sellers say. In the note, Amazon told sellers to refer to Amazon’s Marketplace Fair Pricing Policy before setting their own prices. But that page doesn’t offer specific price guidelines, simply saying sellers shouldn’t “mislead” consumers or set prices that are “significantly higher” than recent prices offered on or off Amazon.

One seller, who wanted to remain anonymous out of fear of retribution, said it’s unclear how to calculate the past average sales price that serves as a baseline for determining price gouging. Another seller said that there’s inconsistency across Amazon’s different marketplaces, as a product banned in Italy was still being sold on its Spanish marketplace.

“The problem is defining price gouging. At the state and Amazon level, there is no clear definition for e-commerce sellers,” this seller said.

SEE ALSO: Amazon bucked one of the worst quarters in market history and posted a gain amid the COVID crisis — here’s why Wall Street loves the stock

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