Amazon to Arbitrate Price Gouging Class Action, Leaving Open Questions of Platform Liability

Proskauer - Minding Your Business

Class actions plaintiffs and state enforcers have tried to use state price gouging laws to hold online retailers accountable for prices set by third parties.  It remains unclear, however, whether platforms will—or can, under the current legal frameworks—be held liable for price increases made by third party vendors.  One of the key cases that could shed some light on this issue, discussed last summer, has been put on hold, pending the completion of arbitration.

A class action was filed in the Northern District of California against Amazon on April 21, 2020.  Plaintiffs allege that they purchased items on Amazon that month at prices that were higher than before the pandemic.  They claim that the higher prices reflected unlawful price gouging by Amazon, since they exceeded the 10 percent threshold for price increases allowed under the California price gouging law, without justifications for cost increases.  Additionally, the complaint alleges that price increases on the site occurred for both products sold by third parties and products supplied directly by Amazon.

On June 22, 2020, Amazon moved the Court to compel arbitration, arguing, among other things, that plaintiffs agreed to its conditions of use (“COUs”) when they registered their accounts.  The COUs contain an arbitration provision, which includes the requirement that “[a]ny dispute or claim relating in any way to your use of any Amazon Service, or to any products or services sold or distributed by Amazon or through will be resolved by binding arbitration, rather than in court[.]”

On May 7, 2021, the court granted Amazon’s motion to compel arbitration, staying litigation in the meantime. The order notes that, “Courts have repeatedly held that Amazon’s layout of its checkout page provides constructive notice to its users of the COUs,” and, understandably, does not engage with any of plaintiffs’ price gouging arguments.  This live issue remains one to watch, given the lack of clarity for platforms and the possibility that they could be held responsible for third party pricing as well as their own product pricing, regardless of their internal policies or compliance actions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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