Price gouging and defective products rampant on Amazon, reports find

Amazon's orange-yellow logo wall.
Enlarge / Amazon’s orange-yellow logo wall.
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New reports released this week serve as a cautionary tale for consumers who shop at Amazon, by far the largest online retailer in the US. While complaints about Amazon’s third-party vendor marketplace are by now commonplace, the new reports find that not only did Amazon itself price-gouge customers during the height of the pandemic, but also that many of its white-label, Amazon-branded products are just as likely to be dangerously defective as third-party goods.

Product shortages—both for pandemic-related supplies such as masks and sanitizer and also for basic household goods such as toilet paper—hit nationwide in February, March, and April as the country shut down and everyone who could holed up at home. As tends to happen when demand skyrockets but supply doesn’t, prices on a while wide range of items went up. And up. And then up some more.

By March, regulators were desperately trying to stem the tide of price gouging flooding online retailers, especially Amazon’s sprawling third-party Marketplace.

Amazon at the time said in a corporate blog post that it was “working hard to protect customers from bad actors” in its Marketplace. “We have suspended more than 3,900 selling accounts in our US store alone for violating our fair pricing policies,” Amazon wrote on March 23, “and we’ve been partnering directly with law enforcement agencies to combat price gougers and hold them accountable.”

Not just third parties

A new report from consumer watchdog group Public Citizen, however, finds that price-gouging for some critical goods was just as prevalent in Amazon’s own first-party sales as it was in its vendor marketplace. Between May and August, for example, Public Citizen found that ordinary antibacterial hand soap, which usually sells for around $1.50, was going for $7—a 470-percent price increase.

Public Citizen’s report includes two instances of markups of 1,000 percent or more: disposable face masks, which were selling for $40 instead of $4, and corn starch, which sold for $9 instead of $0.90. “It is troubling that so much effort was put into blaming third-party sellers, but so little effort was made to stop the price increases—including on the products sold by Amazon directly,” the report concludes. “Amazon is not merely a victim in the price gouging on its marketplace. It is a perpetrator.”

The report confirms previous findings from consumer advocacy group US PIRG looking into coronavirus-related price gouging on Amazon, including on first-party listings. A follow-up report US PIRG published this week found that “erratic pricing” for staple items such as paper towels, facial tissues, flour, and bleach still persists on Amazon today.

“We attempt to identify excessively high prices through manual and automated processes designed to detect prices that are significantly above historical pricing for the same product, taking into account reasonable cost increases experienced by sellers,” Amazon spokesperson Nicole Jefferson told US PIRG about the price spikes.

It is extremely unlikely that anyone at Amazon took the time to manually go through its listings to elevate specific prices by a certain amount. The company infamously relies on dynamic, algorithmic pricing that changes constantly in response to a whole slew of conditions. An April report by The Markup found that coronavirus-related conditions were causing some particularly noticeable price volatility that Amazon did not seem to cap.

Explosive issues

Multiple deep-diving investigations in recent years have found unsafe, mislabeled, counterfeit, or fraudulent goods for sale in Amazon’s third-party marketplace, which is increasingly compared to an unsupervised flea market.

The Wall Street Journal in 2019 found that not only is some of the junk for sale in the Marketplace trash in a very literal sense but also that listings for unsafe items persist even after those goods are recalled or banned from the site.

About 60 percent of Amazon’s retail sales take place through the third-party marketplace, with millions of vendors placing tens of millions of listings. At that scale, it can undoubtedly be difficult to keep up, and perhaps some errors are expected.

Amazon’s own sales, however—the other 40 percent of its retail empire—increasingly rely on and promote Amazon’s hundreds of private-label brands. AmazonBasics is one of the most successful of those brands. It sells the kind of product lines you’d expect to find store brands of in a Target, Walmart, or other big-box store: home goods, bed and bath products, kitchen accessories, luggage, lightbulbs, charging cables, and so on.

You might think that bringing all of those products and brands in-house and listing, selling, and shipping them as a first-party merchant would allow Amazon to exercise much tighter quality control over those goods than it does in the Marketplace. According to a new CNN report, however, you’d be wrong.

CNN identified more than 1,500 consumer reviews of AmazonBasics products that described products overheating, burning someone or something, or outright catching fire. About 30 items with “three or more” reviews describing how a product caught fire were still available for sale at the time CNN published its story. Another dozen vanished while CNN’s story was in progress: “Some became unavailable after CNN began its reporting, and at least four product pages were removed from the retailer’s site entirely—leaving behind dead URLs known by employees as ‘dog pages,'” CNN wrote.

An AmazonBasics microwave, for example, featured more than 150 user reviews describing “safety concerns, including flames and smoke.” Several included pictures of the singed products. CNN obtained one of the faulty microwaves from a customer and submitted it to experts at the University of Maryland for testing.

“As soon as the researchers turned it on, the microwave began sparking and smoking, causing it to react as if its user put foil or other metal inside,” CNN wrote. A user-uploaded video included in the CNN story shows one of the microwaves sparking dangerously when a plastic bowl of macaroni and cheese is placed inside and heated.

Amazon told CNN that relying on user reviews to uncover faulty products is insufficient, saying that it also looks at sales history and customer service contacts when looking for a problem. “Using customer reviews alone to conclude a product is unsafe or imply there’s a widespread issue is misleading,” an Amazon rep told CNN in a statement. However, CNN also found at least 10 reports filed with the US Consumer Product Safety Commission (CPSC) regarding eight different dangerous or faulty AmazonBasics products. Amazon, however, has only ever conducted two official recalls on AmazonBasics goods.


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