On May 13, 2020, Amazon called on Congress to pass an anti-price-gouging law. In the statement, the company pointed to its own efforts in cracking down on unfairly priced essentials during the pandemic, saying it suspended 4,000 sellers in the United States and provided the government with information about a Tennessee seller who hoarded 17,000 bottle of hand sanitizer and was charging $70 each.
"Amazon leverages a number of automated and manual methods to detect potential price gouging in our store," an Amazon spokesperson tells Grow. "In 2020 alone, we blocked or removed over 39 million offers and suspended more than 13,000 selling accounts for attempted price gouging."
But consumer advocacy groups say that's not the full picture. They contend that throughout the pandemic, when American demand for essentials like toilet paper, hand sanitizer, and disinfectant spray was at a high, prices on Amazon increased, sometimes considerably.
A new report by the United States Public Interest Research Group, an organization that monitors unfair pricing practices, appears to underline their concerns. Of 750 products analyzed in a recent report by U.S. PIRG that tracked prices of pandemic essentials, 409 increased in price by 20% or more, and 136 doubled in price. Some product prices were raised as much as 1,000%, according to a different report by consumer watchdog group Public Citizen.
At the time of the report, similarly popular products at Walmart, CVS, and Target were being sold much closer to their baseline price, with the exception of surgical masks, for which prices shot up everywhere.
"It is absolutely crazy that they keep saying [price gouging] is under control," says Alex Harman, competition policy advocate for Public Citizen.
Starting in mid-March, Amazon shoppers were seeing more "out of stock" labels on essentials like toilet paper, paper towels, and surgical masks. And those that were still available were often priced well above retail.
Amazon says it doesn't support price gouging. Still, many products sold on Amazon's platform went up significantly in price when Americans needed them most, says Grace Brombach, consumer watchdog associate at U.S. PIRG.
The PIRG study monitored pricing from December 1, 2019, to December 1, 2020, and only included prices from Amazon and third-party sellers who had been on the platform for at least one year. These parameters were put in place, Brombach says, to be fair to Amazon and exclude sellers who cropped up in April at the height of demand.
"Amazon is a unique marketplace just because it does rely so heavily on third-party sellers," Brombach says. "Third-party sellers are allowed to set their own prices, making it easier for these price spikes to happen."
More than one-third, 36%, of toilet paper increased in price by at least 20%, and 11% at least doubled in price, according to the U.S. PIRG study. A whopping 78% of disinfectant wipes increased in price by at least 20%, and 31% at least doubled in price. And 77% of the hand sanitizers increased in price by at least 20%, and 23% at least doubled in price.
Citing a Profitero study that does not include third-party sellers, Amazon says the prices found on its site are competitive. "Sellers set their own product prices in our store," an Amazon spokesperson tells Grow. "We have a longstanding policy against price gouging, have processes in place to proactively block suspicious offers, and monitor our store 24/7 for violations."
But many of the higher-priced products advocates flagged were sold by Amazon itself, meaning Amazon, not a third party, set the prices.
A 50-pack of surgical masks was being sold by Amazon for $40, instead of the expected retail price of $4, according to the Public Citizen report, which monitored prices throughout 2020. Disinfectant spray was being sold for $13, instead of the expected retail price of $7. This reflects system errors and was not intentional, an Amazon spokesperson tells Grow.
U.S. PIRG reported similar findings. Amazon directly sold 13% of the toilet paper with price increases of 20% or more, according to the PIRG report. The company directly sold 16% of disinfectant wipes with price increases of 20% or more, and 9% of hand sanitizers with price increases of 20% or more.
"It's not simple market factors; it's actually price gouging," Brombach says.
Prices for in-demand items have increased at many retailers, including brick-and-mortar chains. But there is a big difference in how places like Target and Walmart host other sellers.
Sellers on Target must be invited to the platform, and sellers on Walmart cannot price items far above Walmart prices. Both retailers also offer third-party sales on far fewer items and host third-party sellers in their separate marketplaces.
By contrast, Amazon's format allows sellers to alter their prices constantly, and it shows consumers the best available price from all sellers on one page.
Amazon doesn't take ownership of how third parties price products, Harman says. "Amazon can pretend they are not responsible for that [price hike] even though they control every aspect of that transaction."
There is also a financial incentive for Amazon not to ban third parties who are price gouging: The company gets a significant cut of the profit.
Amazon maintains it is doing its best: "Our systems are designed to meet the best available price amongst our competitors and if we see an error, we work quickly to fix it," a spokesperson tells Grow.
The e-commerce giant could do more, Harman says. For example, "they could create penalties" for those selling products far above the retail price, he says. "They know the historical prices. They also know the listing price before it's sold. They could have an algorithm that says, 'Here's what the expected retail price should be.'"
Brombach agrees. Although suppressing price gouging is a demanding task, she says Amazon is more than capable. Even now, there are some in-demand products, like Wi-Fi mesh systems, that are priced higher on Amazon than at other retailers.
"We believe that monitoring the whole site is a difficult feat, but we believe they have the technological expertise to do that," she says. "If we can find these products, Amazon can also find these products."
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