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Merchants Sue Kentucky over Price Gouging Actions

Merchants Sue Kentucky over Price Gouging Actions

Merchants are fighting back against Kentucky’s price-gouging crackdown amid the coronavirus pandemic. The Online Merchants Guild (OMG) sued the Commonwealth on Friday claiming its price-control statutes are unconstitutional when applied to online merchants who offer items for sale in the national marketplace on platforms like Amazon.

The OMG complaint states Kentucky’s Attorney General Daniel Cameron could better and lawfully achieve his goals by directly regulating Amazon rather than merchants who face a patchwork of conflicting laws that “are imposing a substantial burden on interstate commerce and chilling business activity and distorting the market for COVID-response goods.”

Not only does the OMG defend merchants against the price-gouging claims, it paints them as being a positive force during the global pandemic, allowing for the efficient distribution of needed protective gear.

OMG’s lawsuit provides an example of merchant members who acquired masks and hand sanitizer in January, stating: “At a time when supply was short in states like California and New York, where the products were needed the most, members were able to reallocate supplies from the local marketplace to a national marketplace, via Amazon’s retail store, so that these products would get to the front lines, in order to stop or slow the spread of the virus.”

That leads to an efficient allocation of goods in the national marketplace, and generates price signals for manufacturers, which can lead to increased production of in-demand goods, according to the merchant guild.

The Kentucky AG issued a press release on March 26 stating he had issued subpoenas to six third-party sellers in Kentucky who used Amazon “to engage in suspected price gouging during the novel coronavirus (COVID-19) pandemic.”

OMG’s complaint acknowledged that Kentucky prohibits the sale of certain “goods and services” during declared emergencies at prices that are “grossly in excess” of pre-emergency prices and also has a price-control measure that prohibits “unconscionable” prices not limited to emergencies.

However, the statutes are too vague, according to the lawsuit, which says Kentucky doesn’t provide guidance on how to determine whether a proposed sale does or does not violate the law, “nor is there prospective certainty about which goods or services are covered by the law.”

Why don’t merchants attempt to comply with states’ anti-price gouging laws, or simply stop selling in states like Kentucky? Merchants selling on national platforms such as Amazon “lack the practical ability to control the price or sale of goods into Kentucky,” according to the complaint. “Simply put, an Online Merchant Guild member selling on Amazon cannot limit her sales to states other than Kentucky or offer Kentucky-only prices.”

However, Amazon can – “unlike the Online Merchant Guild’s members, Amazon is capable of addressing Kentucky-specific concerns at minimal cost and consistent with constitutional requirements.”

In addition, the OMG explains why merchants cannot cancel sales to Kentucky buyers after the fact: “Amazon has a policy and practice of canceling accounts if merchants repeatedly cancel sales. So canceling Kentucky sales may lead to the destruction of Online Merchants Guild members’ businesses – not just as to Kentucky sales, but as to the nationwide marketplace.”

In citing an example of inconsistent laws across the country, OMG claims Kentucky’s price-gouging laws are inconsistent with Alabama’s, so that a sale that might be lawful in Alabama might be subject to challenge in Kentucky.

The OMG contends that by cracking down on Amazon merchants rather than working with Amazon directly, it could lead to fewer goods available that could – ironically – “ultimately lead to increased prices overall.”

The lawsuit claims Kentucky violated the Dormant Commerce Clause; the Due Process Clause; and the First Amendment.

Kentucky isn’t the only state cracking down on COVID-related price gouging, and the US Attorney’s Office for the Eastern District of New York recently charged a retailer with price-gouging and hoarding under the Defense Production Act of 1950, a federal crime.

The OMG lawsuit can be found on the Online Merchants Guild website.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

One thought on “Merchants Sue Kentucky over Price Gouging Actions”

  1. I don’t get this price gouging movement by AG’s. Don’t they have better more dangerous things to investigate? And who’s to determine what is price gouging? Seems the consumer is the one to determine that.

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