Amazon Explains How It Defines Price Gouging

Allison Lee

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April 2, 2020

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For weeks, Amazon has been under heat to get price gouging under control. One of its most public moves involved removing more than half a million offers from its marketplace, and suspending more than 3,900 seller accounts. 

But price gouging continues to be a sore point, even for sellers. Sellers have reported that their listings are being targeted, despite having the same or lower price than Amazon’s price per unit. Others have said they lowered their prices between January and March, but still got flagged.  

On April 1, Amazon tried to clear up some confusion through a post in its seller forum

“Amazon’s Marketplace Fair Pricing Policy protects our customers from unfair, excessive, and misleading prices. We recognize there may be some confusion as to what may trigger offer removal or account suspension for price gouging under this policy.

While state price gouging laws vary, in general they look to the average sale price (ASP) of an item preceding a state of emergency and prohibit price increases over that ASP due to the emergency. Some states cap those price increases at fixed amounts (10%, for example) while others prohibit “unconsciously excessive” price increases without a fixed cap. Many permit exceptions when the seller can show that the increase is due to the increased costs of goods, freight, or labor.

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. As a starting point, we look at the ASP of the product (excluding any offers that are excessive) as well as the prevailing prices of the product.”

The announcement offered little comfort to some sellers, who claim that the bot itself is broken. 

“My price alerts are set up properly but the items keep on being taken down, i [sic] report it to seller support and all they do is refresh it so it is live again and then a few hours later it is taken down again,” one seller responded on the same forum.

“This policy is causing sellers to stop stocking essential goods out of fear of getting suspended, including myself,” wrote another. 

Recent data on Amazon price trends shows that essential products (like toilet paper, hand sanitizers, safety masks, cough medicine and gloves) peaked at 250% price inflation in early March. That number has since gone down but still hovers above normal rates, especially for cough medicine. 

The decline during mid-March is likely due to Amazon’s first sweep of “high priced” offers. But 33 attorneys general claim it's still not enough. In letters to Amazon, Walmart, eBay, Facebook and Craigslist on March 25, the attorneys general warned that the selling platforms have "failed to remove unconscionably priced critical supplies."

They cited a report by the U.S. Public Interest Research Group, which found that 1 in 6 products sold directly by Amazon (not by third-party sellers) spiked at least 50% in price in February. 

It is yet to be seen whether Amazon will continue its same course of action or make adjustments to its algorithm. Rest assured that we will be monitoring this situation and report back with any updates.

Have something that you want to see us cover? Submit an anonymous topic request and we’ll get cracking. 

Food for Thought

Price gouging is only one of many challenges that Amazon sellers face amid the coronavirus pandemic. While we still believe Amazon is a great place to sell, it’s becoming ever-more apparent that it can’t be the only place where you sell.

One policy change or business decision (think: Amazon FBA’s ban on non-essential items) can severely change the course of your online store. The only safeguard against this is to expand to channels outside of Amazon and to reduce your concentration risk. In a recent study, we even found that multichannel merchants saw 24% more GMV growth (on average) than Amazon-only sellers at the end of March.

If you’d like help getting started on new channels, we encourage you to reach out to our team. Zentail is pre-built to help Amazon sellers launch to new channels, with AI-powered PIM tools to format product data to each marketplace, and inventory management features to avoid costly mistakes. Explore more about Zentail’s multichannel capabilities here

written by:

Allison Lee

Marketing Manager

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