Amazon's been under fire over price gouging. Here's why it wants a federal ban.
Lawmakers could help Amazon and other ecommerce platforms enormously, as long as they hew to the companies' wishes.
Amazon did something Wednesday that companies typically only do when they're desperate: It called for the government to regulate its business. On the company's COVID-19 blog, top lobbyist Brian Huseman called for Congress to pass a national price-gouging law to crack down on the swell of marked-up Purell and other excessively priced items circulating the web amid the pandemic — a problem that has has dogged Amazon's platform.
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"Amazon stands ready to work with Congressional leaders," Huseman wrote, noting that Amazon has removed more than half a million items listed by alleged gougers. "A federal price gouging law would … help retailers like Amazon more effectively prevent bad actors and ensure fair prices."
It may seem counterintuitive, but federal price-gouging legislation may be a big opportunity for Amazon in this year of coronavirus and the election. It could benefit the company and potentially other ecommerce platforms enormously — so long as Congress hews to Huseman's criteria.
Amazon and platforms like eBay and Facebook Marketplace could benefit from legislation that preempts the dizzying array of state price-gouging laws dominating the regulatory landscape today and replaces it with one standard. More than 30 states have price-gouging laws on the books, but there are vast differences among them — and some are much tougher on online platforms than others.
If a bill were to override state laws, "There would be only one legal regime that really controlled their transactions," said Jason Levine, a business litigation and trial partner at Alston & Bird LLP, a firm that has counted Amazon, Microsoft and other tech companies as clients. He said federal price-gouging legislation could help "any large company involved in interstate sales."
Jamie Court, the president of Consumer Watchdog, cautioned that state laws can yield stronger consequences for scammers because "price gouging tends to happen regionally." Under Amazon's plan, enforcement authority would be kicked to the Federal Trade Commission and state attorneys general.
And ecommerce companies could avoid significant lawsuits if Congress heeds Amazon's advice to only hold sellers liable for price gouging, rather than the platforms that host their products.
Grace Brombach, an associate with the U.S. Public Interest Research Group, a liberal policy outfit, said that under a national standard like the one laid out by Huseman, "Amazon still can't be held liable." Currently, most state laws do not allow individuals to sue internet platforms for hosting price-gouged items. Amazon's plan could ensure that it stays that way.
Amazon is also seeking to ensure that consumer protection doesn't go too far. "It's critical federal legislation take into account the fact that actual costs for businesses — including supply, transportation and labor costs — can increase during an emergency," Huseman wrote. He said the company does not want to punish "unavoidable price increases" during an emergency that triggers price-gouging rules.
Since COVID-19 hit, top ecommerce companies have taken voluntary steps to remove listings of items with prices that skyrocketed due to low supply and high demand, such as face masks and hand sanitizer. Amazon said it has poured significant resources into weeding out overpriced items, booting 4,000 seller accounts to date, while sharing tips on criminals with state attorneys general.
EBay said it has a "zero-tolerance" price-gouging policy and has instituted a "price freeze" for items deemed critical during the pandemic. Facebook said it removes "ads and commercial listings" for face masks and hand sanitizer.
But scrutiny of the platforms' roles in disseminating and profiting from overpriced goods has increased. This month, a California woman sued eBay, accusing it of encouraging sellers to jack up the price of masks.
In March, Florida Attorney General Ashley Moody announced she had subpoenaed records from 40 Amazon sellers in a price-gouging investigation. Also that month, a group of 32 attorneys general wrote to Amazon, Walmart, Facebook and eBay, saying they were failing "to remove unconscionably priced critical supplies during the COVID-19 pandemic."
Now there's reinvigorated energy in Congress to pass emergency price-gouging legislation as part of a larger economic stimulus package — if only an agreement can be reached on the particulars. The legislation, announced as part of Democrats' $3 trillion COVID-19 relief proposal this week, would give the FTC authority to pursue price gougers, which the agency currently claims it does not have. However, the Democratic proposal would not override state laws.
As Amazon works to shape the contours of any price-gouging bill that ultimately gets passed, the struggle echoes the debate over federal privacy legislation. Many tech companies have come out in support of passing such a law, albeit on their own terms. "I think the idea is, if you don't get on board the train now, it'll run you over," Court said. "I think that's what most of the big companies are going to try to do."
EBay, Walmart and Craigslist did not immediately respond to requests for comment Wednesday. Facebook declined to comment. But Brombach said it's safe to assume that more ecommerce companies will come out in support of favorable legislation. "I'd absolutely say that Amazon is setting the tone," she said, "and other online marketplaces are likely to follow."