Amazon has suspended thousands of third-party sellers for price gouging during the COVID-19 pandemic, but sellers have found a loophole to avoid detection when raising prices: labeling their products as “collectibles,” even if there’s no conceivable way they could be.
Take this Bowflex dumbbell set, which my colleague Casey Newton encountered while browsing Amazon. Before it sold out in mid-March, Amazon had been selling the weights for $279. This week, the only available weights were from 20 sellers who were offering the dumbbells for between $899 and $1,275 (with free shipping). All had listed the item as “collectible.” The automated systems that detect price gouging appear not to monitor products if their condition is listed as “collectible” rather than “new.”
The seller with the $1,275 dumbbells was also selling a Coleman SaluSpa inflatable hot tub for $1,400, which is also, allegedly, collectible. Back in March, it was going for $359. Other sellers were offering “collectible” Cuisinart bread makers for $239 ($82.76 two months ago) and $279.99 “collectible” Nintendo Switch games that previously went for $79.99. Amazon removed the listings I asked about, but other examples are still abundant, including a “collectible” $450 barbell bar and a “collectible” USB cable for $259.99.
Third-party merchants sell more than half the goods on Amazon, and in normal times, competition forces them to keep prices low. Amazon algorithmically awards sellers the “buy box” on a listing — meaning they get the sale when a customer clicks “buy” — based on some combination of shipping time, reviews, and price. It’s a system designed to drive sellers to undercut each other. But that breaks down when demand is high and supply is low, permitting the last few sellers with, say, PowerBlock Pro 50 Adjustable Dumbbells to effectively name their price ($900).
When this happens, Amazon has an array of other methods for controlling prices. The company used to contractually require sellers to price their products lower than they did anywhere else, but Amazon removed the policy, called “price parity,” last year after attention from regulators. Now, Amazon relies on something called the “Fair Pricing Policy,” a vague set of rules and penalties. The policy says Amazon monitors the prices of items on its marketplace and if it sees pricing practices that “harm customer trust,” it will remove the buy box, prevent sellers from shipping, or suspend the seller. Among the practices that harm customer trust are setting a price that is “significantly higher than recent prices offered on or off Amazon.”
Sellers and marketplace consultants say what counts as a “significantly higher” price is never disclosed, but Amazon appears to set price ceilings for certain items. One seller, who asked to remain anonymous, ran into a price ceiling last year while trying to sell sets of socialism-themed Monopoly games for over $100 and had his listing shut down. Listing the games as “collectible” rather than “new” would have been a way around the ceiling, he says, because Amazon doesn’t apply the same price controls to products in that category. “By listing it as collectible it will bypass the price ceiling that may be there as things that are collectible generally fetch higher prices,” he says.
The collectible loophole has existed for some time, sellers say, but before the pandemic, it was rarely used, because sellers only ran into price ceilings when an item was unusually popular and in short supply, like the socialism Monopoly game. But with COVID-19, entire product categories — cleaning supplies, webcams, home gym equipment — saw unprecedented demand. Supply-chain disruptions meant some items were already running low, and safety concerns in Amazon’s warehouses meant they took longer to restock and ship out. Amazon, and then sellers with normally priced goods, quickly sold out. The remaining sellers raised their prices, sometimes deliberately and sometimes using automated repricing software, and started running into price ceilings. As Amazon’s marketplace came under strain, mechanisms that typically work in the background were brought to the fore.
As Amazon struggled to rein in prices on its platform, it started suspending sellers en masse for price violations. The company says it has suspended half a million offers and more than 6,000 seller accounts for violating its fair pricing policy. Chris McCabe, a former Amazon employee who now works as a seller consultant, has heard from hundreds of sellers who have been suspended or received warnings for price violations, including many he says were false positives — people who haven’t changed their prices for years or who weren’t even currently selling the products in question. “I think they’re just using the same sort of techniques that they’ve historically used, which is carpet bombing,” he says. “Initially they were using wide swaths of price ranges for certain types of products, and over time, that gets improved and some things are filtered out.”
Amazon did not respond to questions about how it sets price ceilings or detects price violations. In a statement, a spokesperson said that sellers set their own prices and that the company monitors its store and removes offers that violate its policies. Amazon removed the listings for collectible dumbbells, hot tubs, and other items after being contacted, though other instances of the loophole remain.
The opacity of Amazon’s price rules, and the difficulty of coming back after getting suspended for violating them, is exacerbating shortages on the site, McCabe says, as sellers decide to sit out the pandemic rather than risk running afoul of the algorithm. “To avoid that whole nightmarish scenario, most people understand that it’s better just not to risk it in the first place, which means the quantities of the items offered for these kinds of products will be lower,” he says.
“It’s not well defined on Amazon’s part, there’s no clear definition of what a pricing ceiling is or how it gets calculated,” says Juozas Kaziukenas of Marketplace Pulse, who’d also encountered the $1,000 collectible Bowflex dumbbells.
Sellers with a more flexible attitude toward price gouging rules, meanwhile, manage to evade the dragnet by claiming their items are collectibles, a tactic McCabe has also seen recently.
“If there’s very high demand and low supply, that item will be sold one way or another,” says Kaziukenas. “Usually by sellers finding cracks in the algorithm.”