Lauren Rosenblatt / The Seattle Times (TNS)
SEATTLE – The Washington State Supreme Court last week ruled in favor of consumers who were victims of price gouging in Amazon’s digital store at the beginning of the COVID-19 lockdowns.
Seven justices of the Supreme Court in Washington ruled that the usury allegations against Amazon could constitute an “unfair” business practice under Washington state consumer protection law, opening the door for a proposed class action lawsuit against the company.
This is important because, unlike most other states, Washington has no law preventing excessive price increases during times of emergency, such as after a natural disaster or a global pandemic.
Amazon, which said at the height of the pandemic lockdowns that it would not tolerate price gouging, argued in court that Washington state’s consumer protection law did not apply in this case because it did not explicitly prohibit price gouging. A decision on the parameters of the law was “best left to the legislature,” the company argued.
But in a majority opinion filed Thursday, the justices of the Supreme Court in Washington wrote that Amazon’s arguments were “unpersuasive” and “unconvincing.”
The documents do not provide a definitive answer on whether Amazon actually raised prices excessively – thereby harming consumers and generating what the plaintiffs called “blockbuster profits” – but they could pave the way for that decision.
“The court made it clear and explained that there are many ways to claim an unfair business practice, and this is one of them,” said Steve Berman, a Seattle-based attorney with Hagens Berman who is representing consumers in the case.
After the Supreme Court ruling, the case will go back to district court and a jury will hear the price gouging allegations, Berman said. Lawyers have sought class-action status, meaning it would cover any shopper who overpaid for an item on Amazon during the state of emergency period.
But the Supreme Court’s decision has already set a precedent, Berman continued. It offers buyers “protection from this type of behavior,” he said. “I think the law has always been there, but now the Supreme Court has just upheld it.”
Amazon did not respond to multiple requests for comment on this story.
In a March 2020 blog post, during the pandemic-related lockdowns, Amazon said it had already taken steps to combat price gouging on its platform. Among other things, the company had removed more than “half a million” listings from its store that were due to coronavirus-related price gouging and blocked more than 3,900 seller accounts in the US for violating the company’s fair pricing policies.
“Amazon has zero tolerance for price gouging and has long-standing policies and systems in place to prevent this harmful practice,” the company wrote.
The state Supreme Court was responding to a lawsuit filed in October 2021 in the U.S. District Court for the Western District of Washington. Five plaintiffs from California, Arizona and North Carolina alleged that Amazon raised prices on goods they couldn’t find on other e-commerce websites at a time when they couldn’t easily leave their homes to look at other stores.
The plaintiffs claim they overpaid for cleaning supplies, distilled water, dry yeast, ramen noodles and ingredients for making hand sanitizer in March and April 2020.
Some plaintiffs had concerns about their health and safety and would therefore be at high risk if they contracted the COVID-19 virus. Others were trying to purchase supplies for their loved ones but had difficulty finding the items they needed.
Amazon controls the prices of its own goods and those sold by third-party sellers on its platform, the lawsuit said. The e-commerce giant is also the only party that benefits from the price increases, it said.
The district court referred some of the legal issues in the case to the state Supreme Court in April 2023.
In court filings last Thursday, seven judges found that Washington state consumer protection law applied to the price gouging allegations.
Five justices even concluded that if the plaintiffs’ allegations were true, Amazon violated consumer protection law. In the majority opinion, they wrote that the plaintiffs had shown that the price gouging caused substantial financial harm that could not reasonably have been avoided and that was not “outweighed” by other benefits to shoppers or competition in the e-commerce sector.
“They have shown that Amazon’s actions had far-reaching effects and that Amazon is responsible for the price increases of its own products as well as those supplied by third parties,” the justices wrote in the majority opinion. “They had no meaningful choice but to buy their products from Amazon…”
Amazon’s argument that the Consumer Protection Act does not apply “contradicts the stated intent of the Act, which is ‘to protect the public and promote fair and honest competition,'” the judges continued.
Justice Helen Whitener wrote the majority opinion, with Justices Steven González, Raquel Montoya-Lewis, Debra Stephens and Mary Yu joining.
Justice Barbara Madsen wrote in a concurring opinion that while the Consumer Protection Act applies, the Supreme Court does not have to go so far as to determine whether Amazon violated the law.
Judge David Keenan wrote in a second concurring opinion, joined by Judges Yu and Montoya-Lewis, that the Consumer Protection Act also covers “reasonable business practices.” Keenan, a King County Superior Court judge, is serving as judge pro tempore in the case.
The concurring opinion was intended to refute Amazon’s claims that applying consumer protection law in this case would lead to “price controls” and make it more difficult for Amazon to balance supply and demand.
In the majority opinion, the judges declined to set a 15 percent price increase as the benchmark for an “unfair” business practice because it “goes beyond the jurisdiction of this court.”
Such a threshold should be better set by the legislature, as it depends on “numerous social and economic considerations”, it said.
In a dissenting opinion, two justices used a similar argument to hold that the Consumer Protection Act did not apply in this case. The law does not require the court to determine which business practices are unfair without considering other market factors. That task is more appropriate for the legislature than the Supreme Court, the justices wrote.
“I do not believe that we should be the first court in the country to initiate a price gouging action based on the general language of the statute prohibiting ‘unfair … acts’ in trade or commerce,” wrote Justice Sheryl Gordon McCloud in her dissent, joined by Justice Charles Johnson.
Berman expects the trial to begin in two years. In the meantime, Berman said, he plans to ask Amazon how it defines price gouging by third-party sellers and compares that to the company’s own products.
If a jury rules in favor of the buyers, those who overpaid would get their money back, Berman said. And if the jury decides as Berman hopes, Amazon will “be much more careful in the future.”
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