by Alex Harman
Part 7 - Amazon Calls for Federal Price Gouging Legislation
Part 7 - Amazon Calls for Federal Price Gouging Legislation
After two months of media reports of price gouging on its platform, Amazon publicly called for a federal price gouging law “to ensure there are no gaps in protection for consumers” and to “complement” the efforts to fight price gouging in the states.
The framework preferred by Amazon would include elements from many state statutes, including prohibitions on “unconscionable” price increases and an allowance for actual cost increases.
The Amazon framework recommended that price gouging prohibitions go into effect whenever a federal public health or national emergency is declared. Notably, Amazon would have the prohibition apply to all levels of the supply chain rather than just retailers.
However, the Amazon proposal would include language to clarify that the price gouging prohibition “should apply to the party who actually sets the price.” If it became law, this language would immunize Amazon from liability for price gouging by third parties that sell on its platform.
In calling for a federal price gouging statute, Amazon argues that a federal law would protect consumers where there are existing gaps in the law, “complement the great work being done by state attorneys general,” and provide clear guidance to potential price gougers as well as “honest sellers.”
The nature of online platforms which transcend state borders has made price gouging enforcement increasingly more difficult at the state level. In March, Kentucky Attorney General Daniel Cameron worked with Amazon to identify third-party sellers based in Kentucky who were engaging in price gouging of essential emergency and medical supplies, issued cease and desist orders to more than half the sellers. He issued subpoenas to six of them.
In response, the Online Merchants Guild filed a lawsuit against Cameron taking the position that the Kentucky price-control statutes are unconstitutional when applied to Kentucky merchants who sell on a national marketplace like Amazon.
A federal court in Kentucky agreed with the Online Merchants Guild, and granted a preliminary injunction against the Kentucky price gouging law finding that targeting Amazon sellers who sell on a national platform violates the U.S. Constitution under a principal called the “dormant Commerce Clause.”
Put simply, the court held that the Kentucky price gouging law is likely unconstitutional because it attempts to regulate prices outside of Kentucky. This decision ultimately could prevent any state price gouging law from applying to online sales platforms such as Amazon.
With this latest legal development, combined with the minority of states that have no price gouging protections, it is clear that a federal price gouging prohibition that augments existing state protections is urgently needed.
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