How Amazon raised prices to profit from the pandemic

by Alex Harman

Part 4 - Background on Price Gouging During the COVID-19 Pandemic

As the COVID-19 pandemic took hold through the early months of 2020, first in China and then across the world, demand increased for respirators and surgical masks. By the time the first U.S. death from COVID-19 had been reported on February 29, 2020, reports of price gouging on sales of protective masks on Amazon had already resulted in a warning from Amazon to third-party sellers against engaging in price gouging.

Soon, brick and mortar retail stores such as Target, Costco, and Kroger began to impose limits on the quantity of certain products each customer could purchase because of shortages and hoarding of products such as toilet paper, hand sanitizer, and disinfectants. Increased demand for essential products on online marketplaces didn’t manifest in empty shelves – it meant sellers charging excessive prices. As the pandemic worsened, so too did the price gouging on Amazon.

States Declare Emergencies and Issue Stay-At-Home Orders

On February 29, 2020, Washington Gov. Jay Inslee (D) declared a state of emergency in response to the first reported deaths from the coronavirus. The next day the governor of Florida issued an executive order declaring a state of emergency. In the following days other states began to follow suit, and by March 18, 2020, every U.S. state and territory had declared an emergency. Nearly all of these orders have been renewed or continue to be in effect.

In some states, such as New Jersey and Illinois, the governors’ emergency declarations expressly prohibited price gouging, typically defined as unreasonable or excessive price increases on certain essential products during an emergency. While in other states, the disaster declaration triggered an existing statute prohibiting price gouging.

Over the next period of weeks, one by one, states began to issue so-called “stay-at-home” orders whereby residents were directed to stay at home, shelter in place, and practice social distancing. Essential travel, including shopping at grocery and drug stores was exempted from the orders, but with shortages and the fear of spreading the virus, millions of Americans turned to food and retail delivery services, including, and especially Amazon.

Amazon has benefited from a significant increase in sales during the pandemic. The policies put in place to prevent the spread of the coronavirus directly contributed to massive growth in on-line sales of almost 60%, and no company was able to benefit as much as Amazon. Amazon’s second quarter earnings report, which covered the period beginning when most stay-at-home orders were first put in place, included a 40% increase in sales and a 100% increase in profits. To manage the growth in sales volume, Amazon has reportedly hired 175,000 new employees since March 2020.

The consumer reliance on Amazon due to pandemic made the widespread reports of price gouging that much more concerning.

Source, links, references:

https://www.citizen.org/article/prime-gouging/

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