There’s been an uptick in price gouging-related suspensions on Amazon during the COVID-19 pandemic, prompting site-wide listing deactivations in essential and non-essential item categories.
In response, Amazon posted a video with their Director of Pricing, Christa Glenn, to answer a few frequently asked questions about price gouging.
We’ll break down the ambiguous language on what price gouging is, how Amazon determines pricing violations, and our criticisms (as a seller and seller liaison) of unwarranted suspensions.
Price Gouging History
Amazon’s Fair Pricing Policy isn’t new.
In fact, during peak shopping events where there’s a sizeable shift in supply and demand, like Prime Day, Christmas, and Black Friday, Amazon often increases its account reviews and pricing practice checks.
Price gouging-related suspensions during the COVID-19 pandemic is another instance in which Amazon’s Fair Pricing Policy comes into play.
Answers to Frequently Asked Questions on Price Gouging & Amazon’s Fair Pricing Policy
What is price gouging?
Price gouging is when an item is priced at and sold for much higher than what is considered fair. Usually, it happens during an emergency or natural disaster that greatly increases the prices for essential consumer goods.
What is Amazon’s Fair Pricing Policy?
Every Amazon Seller has to agree to abide by the Amazon Marketplace Fair Pricing Policy in order to sell on Amazon. It’s set in place by Amazon to ensure good customer experience, but also covers what’s required by state laws, which may vary.
Amazon’s pricing policy can be enforced on all sellers and all products in any category.
For a more in-depth breakdown of the Amazon Marketplace Fair Pricing Policy, check out our blog on 3 Things to Know about it here.
How does Amazon determine your product price is too high and needs to be lowered?
Amazon compares the average sale price of the product (ASP) to determine if something is being price gouged.
To determine price gouging, they take price history and pricing of similar products to identify increases on Amazon (internal benchmarking). They also look at “external pricing benchmarks” from other retailers. They advise sellers to compare listing prices to the current lowest price and buy box price, which changes often.
If they find an offer that violates the Fair Pricing Policy they will deactivate it. You can reactivate an offer in the fixed price alerts or account health dashboard.
Why can’t Amazon just tell sellers what the max price of an item is?
Amazon can’t just tell sellers what the maximum price of an item is because they want to keep prices for products as low as possible. If Amazon were to encourage a price cap, it may lead to Sellers setting their prices at the maximum, which can harm the customer experience.
Price gouging thresholds change frequently. They don’t have an answer to this except they’re trying to make it more transparent in the future.
What can Sellers do to avoid being suspended for price gouging?
In the video, Glenn doesn’t offer many resolutions for Sellers.
Glenn states that the only thing sellers can do at this time is to keep an eye on competitive product prices.
Additionally, as a seller, if you’re selling multi-pack or bulk products, you’ll have to be careful to differentiate your product details from single products.
For a few other tips on how Sellers can take action, here are 7 ways to avoid price gouging suspensions.
How does the Fair Pricing Policy work during COVID-19?
Amazon only states that they’ve increased monitoring and enforcement on specific categories like household products and medical supplies but are also looking at everything.
That means that, although price gouging in the traditional sense often only applies to essential items, every item sold on Amazon’s platform is subject to price monitoring.
Many of our clients and other Amazon sellers have expressed deep frustration with the Amazon algorithm’s determination of pricing violations.
Amazon isn’t transparent enough about how to avoid pricing violations
In some cases, sole distributors are experiencing listing deactivations despite showing the product has an MSRP/MAPS pricing agreements with its original brands to prove their goods, legally, cannot be sold at a cheaper price.
In the video, Glenn admits that even sellers who haven’t changed their product prices may be flagged for price gouging violations. Amazon justifies this by claiming that although product price may not have been changed, ASPs are constantly changing.
Additionally, Glenn states that Amazon can’t just tell sellers what the maximum price of an item is because they want to encourage competition among sellers to give customers the lowest price.
If Amazon were to encourage a price cap, it may lead to Sellers setting their prices there and customers finding a product at a lower price elsewhere, thus Amazon losing sales.
Amazon’s algorithm misses the mark
Amazon’s pricing algorithm is making too many mistakes, leading to listings that aren’t breaking any rules being taken down.
Supposedly Amazon has a system that is looking at sales data of the ASIN as well as looking at sites off of Amazon to determine a product’s price.
However, we theorize that Amazon’s external crawlers find low prices from sites selling an opened product, refurbished product, or product in a liquidation sale. This is a problem because it assumes that that is the true market price when it’s not.
Amazon Support isn’t equipped to help
Because there are so many mistakes, it’s likely that Amazon support hasn’t been briefed on how to handle the influx of incorrect suspensions.
Our own team of Amazon experts has reported that, despite providing the qualified documentation and lowering prices in an attempt to reactivate listings, Amazon Seller Support is just as confused with how to cope as Amazon Sellers are.
Though the pandemic and other circumstances that encourage price gouging are often unprecedented, it’s fair to say that even Amazon itself doesn’t care to make their price gouging standards fair for its Sellers.
It is fair that Amazon mobilize to prevent price gouging for all products, especially for limited resources during a pandemic. However, their spray-and-pray approach to price gouging during a pandemic is unrefined and, in many cases, gone overboard.
In Glenn’s Deep Dive on Price Gouging video, she admits that currently, Amazon doesn’t have an answer to how they can make their bots reduce their error rate.
It seems that Amazon is more concerned about making money than preserving the quality of the selection of products available on their website.