Since the advent of Covid, the normal trends in supply and demand for services and goods have been heavily disrupted; one of the most affected being cleaning supplies and safety masks. Drug stores and local shops are almost always sold out and panic buyers are expected with every new piece of information coming out. And in the wondrous unicorn world of Amazon, things look even worse.
Amazon offers goods at a variety and cost that is hard to beat. The direct Amazon to buyer approach is not new, many other online retailers use this, but they stand out with its vast selection and all-encompassing offers. Not only does Amazon allow individuals to sell products, but it also works with larger corporations (and even ghost-companies) to sell its goods. And while the company has faced constant scrutiny and controversy in the way they treat their workers and their piranha-like business practices, it still has not been able to deter its success. Their ease of service is a comfort many find security in. Now, with their temptingly fast non-contact deliveries, it was no surprise that they were one of the winners that emerged out of this pandemic.
However, an issue that Amazon has had to deal with is price gouging. Normally, when an individual attempts to sell a product way above its normal market price, there are countless other options for rational buyers to choose from. Amazon does nothing to it, and simply waits for the seller to update its price to be competitive. But, with the surge of demand for masks, cleaning supplies, hand sanitizers, and gloves, many suppliers had run out of stock.
As a result, individuals and even some small businesses began to sell these essential safety products at prices that were 33xs higher than their market price. For example, Purell Hand Sanitizers were being sold from $100-to-$350.
It is important to note that this issue wasn’t entirely on purpose. A lot of sellers use third party price calculators that measure demand and supply to manufacture their prices; they use an algorithmic approach. With these instances, third-party seller platforms rush to have them removed, as they adhere to very strict anti-price gouging guidlines – but they haven’t been able to remove all of them.
This is not only detrimental to everyday people, but especially harmful for hospitals and health care facilities that require these products to give proper and safe care to COVID patients. Despite the efforts of government funds, many hospitals still face equipment shortages and must look to the private sector. In California, Penal Code Section 396 declares price gouging as criminal during a declared state of emergency. After Governor Gavin Newsom declared a state of emergency in March, sellers based in California were prohibited from raising prices by more than 10%. However, federally, US antitrust law does not outlaw price gouging, allowing for online corporations like Amazon to not be held legally responsible to manage price gouging. And there lies the rub.
In this global crisis, what is Amazon’s responsibility in this issue?
Currently, Amazon has removed “Buy Box” for price-gouged items and offered “See All Buying Options,” which allows customers to view different prices for similar products. But, they have not regulated it any further. Should Amazon penalize these price gougers? Should they incentivize them to lower their prices? Should they completely remove their listings? Or are they not responsible at all? What are the ethics at the center of this issue?
I say they are. A free market is only free when it is based on rational, and in this irrational time, it is the responsibility of every citizen (even Jeff Besos) to ensure that the market flaws are fixed. A corporation has many stakeholders; some are people, organizations, or abstract concepts like the environment. Ensuring that price gouging does not hinder consumers’ ability to access essential equipment does not hurt any stakeholder’s interests, therefore, there should be no barriers except Amazon’s own conviction. Right now, they don’t have the technology power to compare every price to new metrics based on Covid inflammations, but there must be an investment of more effort to mitigate its effects.
In this case, profit must come last in priorities; it is the most ethical decision. Regulatory practices must be adopted to protect people, even by the hands-off public heaven that is Amazon.
COVID-19: Antitrust Implications of Dynamic Pricing, Online Third-Party Seller Platforms and Price Gouging. (n.d.). Retrieved February 9, 2021, from https://www.cooley.com/news/insight/2020/2020-03-30-covid-19-antitrust-implications-of-dynamic-pricing-online-third-party-seller-platforms
How Amazon Works. (2006, January 25). HowStuffWorks. https://money.howstuffworks.com/amazon.htm
Rey, J. D. (2020, March 5). Why Amazon can’t stop coronavirus price gougers. Vox. https://www.vox.com/recode/2020/3/5/21164622/coronavirus-amazon-hand-sanitizer-price-gouging