Coronavirus price gouging - a tough game of 'whack a mole' for online retail platforms

Profile picture for user slauchlan By Stuart Lauchlan March 10, 2020
Summary:
Profiteering at a time of crisis is nothing new, but the current Coronavirus outbreak presents ethical challenges for the online retail platform giants.

California
Governor Gavin Newsom

What would you expect to pay for a small tube of hand sanitizer? In normal times, you’re talking pocket change. Today, as the Coronavirus crisis continues, you’re talking whatever sellers choose to charge - and that is likely to involve some serious price gouging.

Of course profiteering in a time of crisis is nothing new. As panic spreads and supply chains come under pressure, goods vanish from the shelves - both physical and virtual - and the unscrupulous move in. In times of war, the Black Market thrives - fact of life. The spivs of World War II with their illicit nylons and bananas of dubious origin are part of cultural folklore.

What’s different with the current global health scare is the profiteers aren’t just shifty looking individuals dealing dodgy merchandise off the back of a cart on a street corner. Today they have vastly increased reach via the rise of the online retail marketplaces - and that’s creating new governance and ethical challenges for those platform providers that they need to get to grips with before regulators decide to do it for them.

There is, of course, legitimate supply and demand. As a kid I used to collect a range of novels, first editions of which today demand asking prices on Amazon of upwards of £1000 in one case. That’s basic free market economics in action. The novels are long out of print and hard to track down. If you own one and are willing to sell it, it’s up to you what you ask for it and up to the buyer to decide whether they’re prepared to pay that. No-one gets hurt.

But when hand sanitizers, disinfecting wipes and other health-related items that can’t be found on the pharmacy counter turn up on Amazon or eBay at vast mark-ups, that’s a whole different matter. The question is, what can realistically be done about it? It’s like an online game of ‘whack a mole’ - no sooner is one price scalper warned off pimping its wares on a digital retail platform, than another one will pop up.

For example, eBay has decided to ban US listings for hand sanitizer, disinfecting wipes and surgical masks. But there are close on 1.5 billion listings on eBay. How much AI and human intervention would it take to police this ban effectively?

A quick search this morning finds a ‘bargain’ deal of 4 small bottles of hand sanitizer for $65 plus $64.99 shipping. Another listing offers a bottle of Purell for $60 plus $76.10 shipping.  Now, those listings, when clicked upon, take would-be buyers to a Page Not Found, so in those cases action has been taken to prevent sales. (Normally priced offerings remain active.) So where the culprits can be tracked down, they are being dealt with, but the scale of the task is daunting.

Amazonian challenge

Inevitably, the Great Satan of retail, Amazon, has attracted the greatest level of ire from politicians and regulators weighing in. US Senator Edward Markey last week wrote to Amazon CEO Jeff Bezos demanding the inevitable cri de coeur of ‘something must be done!’. He said:

As the world confronts the prospect of a serious and far-reaching pandemic, corporate America has a responsibility to prevent profiteering on the sales of items such as hand sanitizer and surgical masks. No one should be allowed to reap a windfall from fear and human suffering.

Internet-based retailers, such as Amazon.com, have a particular responsibility to guard against price gouging in current circumstances as consumers - who are finding the shelves of local brick-and-mortar stores bare, and who may wish to avoid venturing into crowded stores and shopping malls - turn to the internet.

In California, Governor Gavin Newsom, declaring a state of emergency, expressed similar sentiments:

You’re literally seeing small hand sanitizers being sold for $17, I’ve seen some online for even more. It’s unconscionable. It’s usurious. We need to go after those who are price gouging, not just for hand santizers, but for medical supplies and other medical equipment. This proclamation substantively allows for that to be addressed with the kind of urgency that is appropriate for the moment. There will be a consumer alert going out that we are aggressively monitoring that kind of price gouging.

At this point, it should be noted that Amazon is being active in its response. Over the past week it has barred more than 1 million ‘snake oil’ products that spuriously claimed to cure or defend against the coronavirus, as well as removing over half a million deals from “bad actors” on its marketplace. In a statement, the retailer said:

There is no place for price gouging on Amazon. We are disappointed that bad actors are attempting to artificially raise prices on basic need products during a global health crisis and, in line with our long-standing policy, have recently blocked or removed tens of thousands of offers.

To his credit, Governor Newsom recognized the effort being made:

Amazon immediately got back to the state of California and are working cooperatively to go after those that are taking advantage of customers that utilize their platform  That’s the spirit which we were hoping to see and we hope other platforms provide similar response and responsiveness to address the price gouging that we may be experiencing, not just in this state but across the country.

But the problem will inevitably continue. Facebook has banned ads and listings for surgical face masks, (albeit only temporarily). According to Rob Leathern, Head of the Trust/Integrity Team for Ads and Business at Facebook:

We’re banning ads and commerce listings selling medical face masks. We’re monitoring COVID19 closely and will make necessary updates to our policies if we see people trying to exploit this public health emergency. We’ll start rolling out this change in the days ahead.

But he acknowledged the ‘moving goalposts’ nature of the task:

We are rolling this out in the coming days, and anticipate profiteers will evolve their approach as we enforce on these ads.

And of course, it’s not just a US challenge. In the UK, the Competition and Markets Authority (CMA) has warned that it will take action against any retailer, online or offline, that is deemed to be profiteering. CMA CEO Andrea Coscelli, said:

We urge retailers to behave responsibly throughout the coronavirus outbreak and not to make misleading claims or charge vastly inflated prices. We also remind members of the public that these obligations may apply to them too if they resell goods, for example on online marketplaces.

Meanwhile in France, Finance Minister Bruno Le Maire is imposing price controls on items such as hand sanitizers and warns that he will instruct action to be taken against retailers and retail platforms that attempt to price gouge or facilitate profiteering.

My take

As I wandered past my local pharmacist this morning, there was a man standing outside with a tray of hand sanitizers that he was trying to sell to passers-by in a manner more akin to a drug dealer pushing weed. Anyone daft enough to buy whatever he’d put into the bottles, well, it’s a case of caveat emptor as far as I’m concerned.

But the Coronavirus does present online retail platforms with another ethical challenge to which they must be seen to rise. Politicians on the make and regulators with a gleam in their eyes already have enough sticks with which to beat the likes of Amazon without being gifted another.

To their credit, the major players have realized this and are being seen to behave responsibly. But how long they continue to play ‘whack a mole’ remains to be seen. Like everything else to do with the current crisis, it’s too early to tell what’s going to happen.