Class Action Lawsuit Alleges Amazon is Exploiting Consumers During COVID-19

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In a class-action lawsuit filed in the U.S. District Court for the Northern District of California, two California residents “seek to hold Amazon accountable for its unlawful price
increases during the COVID-19 pandemic.”

The plaintiffs allege in the 47-page complaint, “Exploiting consumers in their most vulnerable hour is not only contrary to basic human decency—it is a criminal offense in California and presumptively unlawful under California’s Unfair Competition Law. See Cal. Penal Code §§ 396(h), (i).”

“In these unprecedented times, many American consumers have experienced their first
taste of scarcity and financial distress, and for vulnerable Americans who already live on the precipice, things have gotten demonstrably worse.”

“In the wake of the outbreak and spread of COVID-19, essential consumer goods have disappeared (or appear unpredictably) on retails shelves, and shoppers must often wait hours to enter popular brick-and-mortar retail outlets in the hopes that supplies have been restocked.”

“In this environment—consistent with the directions of government and public health
officials—consumers have understandably turned to online purchasing, and Amazon in particular, to fulfill their essential needs.”

“Without venturing into public and risking exposure to themselves and others, with just a few clicks Americans can purchase consumer goods from Amazon that will be delivered to their homes. Indeed, Amazon’s sales have never been higher, and since the COVID-19 pandemic began, its sales in some categories (e.g., home items) are up more than 1,000 percent.”

Price Increase Examples Cited

The complaint includes examples of unlawful price increases:

  • Face Masks: Increases exceeding 500 percent, from less than $20 to $120
  • Pain Reliever: Increases of 233 percent, from $18.75 to $62.40
  • Cold Remedies: Increases up to 674 percent, from $4.65 to $35.99
  • Black Beans: Increases up to 672 percent, from $3.17 to $24.50
  • Flour: Increases up to 400 percent, from $22.00 to $110.00
  • Disinfectants: Increase of 100 percent, from $14.99 to $29.99

Plaintiffs Claim Amazon is The Functional Seller

The complaint acknowledges that some products offered at inflated prices are by third-party marketplace sellers and argues that Amazon being the functional seller is responsible for them.

“Some of the unlawful increases were on sales of products supplied by third parties, sales which Amazon controls and reaps huge profits from. Amazon is the functional seller of these products and is responsible when price-gouged sales violate the law.”

Furthermore, the plaintiffs allege illegal price increases also occurred on products from Amazon’s own inventory.

“But in addition, Amazon has inflated prices on its own inventory of products, which Amazon supplies and sells directly to consumers. A study by the Public Interest Research Group (“PIRG”) shows that, in February 2020, Amazon increased those prices by more than 50 percent on one-sixth of public health products used to combat COVID-19.2”

“And perhaps most troublingly, Amazon has maintained its unlawfully high prices on many essential items while publicly trumpeting its efforts to prevent price gouging by third-party suppliers.”

Other Criticism Against Amazon About Price Gouging

This lawsuit is not the first criticism against Amazon regarding price gouging during the coronavirus (COVID-19) public health emergency.

In mid-March, 33 State Attorney Generals demanded in a letter to Amazon and other marketplaces that they do more to stop price gouging on their platforms.

“We believe you have an ethical obligation and patriotic duty to help your fellow citizens in this time of need by doing everything in your power to stop price gouging in real-time,” the letter read.

Earlier this month, the Online Merchants Guild, a seller advocacy group, in a letter to State Attorney Generals, stated they should look at Amazon as the primary responsible party regarding price gouging on its platform, in effect making the same argument as the lawsuit that Amazon is the functional seller.

Amazon is the only party to the transaction that can control prices on a state by state basis, taking into account each state’s price gouging law, and imposing the appropriate price ceilings, so it’s Amazon’s responsibility as the world’s largest ecommerce store to ensure the laws are being followed, not to earn 15%-30% from each high-priced sale, cause panic in the marketplace, claim willful blindness, and turn their sellers into scapegoats.”

 

Paul Rafelson, OMG’s Executive Director, attorney and adjunct law professor at Pace University in New York

Law & Crime reports that Amazon declined to comment on the lawsuit but said, “There is no place for price gouging on Amazon and that’s why our teams are monitoring our store 24/7 and have already removed tens of thousands of offers for attempted price gouging.”

“We are disappointed that bad actors are attempting to take advantage of this global health crisis and, in addition to removing these offers, we are terminating accounts and working directly with states attorneys general to prosecute bad actors and hold them accountable.”

The 47-page complaint is available here in PDF format.

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