News Story

Amazon Snitching On Michigan Retailers For Alleged Price Gouging?

Online retail giant sending attorney general local store names and sales data to aid in state enforcement

The online retail giant has been delivering to the Michigan Department of Attorney General the names and sales data of Michigan companies to aid investigations into alleged price gouging.

An April 28 letter sent by the attorney general’s office to a Michigan business mentioned the arrangement.

“As a means of enforcing its own Marketplace Fair Pricing Policy, Amazon identified a group of third-party sellers of concern, i.e., those third-party sellers who grossly inflated the prices of Coronavirus-related consumer products sold on the Amazon marketplace," the AG's letter stated. "To assist us in carrying out our function under the MCPA, Amazon provided this Office with a list of those third-party sellers that are based in Michigan, along with the sales data for each of those sellers."

In the letter, the attorney general’s office recited the sales dates and prices of the product that the company sold on Amazon and the location of the customers who bought it.

The attorney general’s spokeswoman, Kelly Rossman-McKinney, confirmed the relationship between the office and Amazon in an email.

“Amazon has shared the names, addresses, and sales data related to third-party sellers within the State of Michigan that Amazon itself suspended for engaging in unfair pricing activities on products associated with preventing the spread of Coronavirus,” Rossman-McKinney wrote. “Related to sales data, Amazon is sharing with us the products sold, the price paid, and the cities and States where the buyers reside. Amazon also shares with us the historical data on the product pricing that is reflected in the notices of intended action. Amazon is not supplying to us the identities or addresses of the purchasers from the third-party sellers.”

Amazon has a policy on sharing information about customers.

“We know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly,” Amazon states on its website.

Amazon didn’t respond to an email seeking comment.

Many economists argue that the term “price gouging” is effectively a political label for what should called “scarcity pricing.” This refers the rationing effect of raising prices so as to avoid product shortages when demand temporarily exceeds supply. Michigan is experiencing that with toilet paper and face masks.

University of Michigan economist Don Grimes said he recently paid a higher price than usual for toilet paper.

“Obviously nobody likes to pay for something at inflated prices, I gagged at a price of $5 for a package of toilet paper a few weeks ago,” Grimes said in an email. “The problem is if you don’t use price to allocate scarce resources, what method do you use to determine who gets what? If meat is going to be in short supply how are you going to determine who gets the available supply? Ration cards? Theoretically could work for short time in a crisis situation (and current situation qualifies), but you would need an even larger bureaucracy to validate and distribute those cards than the unemployment system, which has not been particularly good at distributing checks, although the system in Michigan has been better than other states.”

Grimes continued: “Are you going to ration based upon people standing in line? Works well for people who are unemployed, but what about essential workers who actually don’t have time to stand in lines? Over a long-period of time, rationing creates a black market and encourages cheating and political favoritism. I am not a fan of ‘price controls’. They don’t work nearly as fairly or as efficiently as the price system in reality.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.