Amazon was founded in 1994 in Bellevue, WA. Amazon has a current net worth of more than $1.7 trillion dollars. Amazon is known for offering millions of products, and thousands of “trusted” third-party sellers offering more the 350 million products. Amazon had begun to notice third-party sellers were price gouging certain products that were in high demand due to the pandemic and other sellers scamming customers who were looking for products to help prevent, fight, and even cure the Coronavirus.
This case study analyzes the behavior and action of the third-party sellers and if Amazons action were ethical or not using the four ethical theories Individualism, Kantianism, Utilitarianism, and the four cardinals of Virtue theory. In the ethical theory of Individualism under both Milton Friedman and Tibor Machan Amazon’s action against third-party sellers pass their ethical perspective since the third-party sellers are not profiting within the law of the land and not profiting met by indirect goals not aiming at profiting; respectively. Utilitarianism focuses on maximizing happiness in yourself and others and because third party sellers are taking advantage of amazon’s platform and customers by manipulating, lying, and scamming. In result, Utilitarianism would side with Amazon and their decision. Kantian’s basic principles include being rational and of goodwill and since these third-party sellers were not being rational and of goodwill by doing what is right because it is the right thing to do Amazon’s decision to suspend and remove third party sellers from their platform was morally permissible. Virtue theory includes courage, honesty, justice, and temperance. Amazon had the courage to come forth and rectify the situation by suspending as well as removing the third-party sellers from the platform. Third party companies that were selling products claiming it can cure or prevent COVID-19 were not being honest. Amazon was being honest because they are exposing the fake products sold by third party sellers on their platform. The justice was unjust for those accounts that were able to get around the policies or able to appeal the decision for being suspended or removed from the platform. Temperance includes what it means to be reasonable. When you are being in good faith of the customer by selling them products at an appropriate price including, products that do what they are designed to do then you are being temperate. Since the third-party sellers fail in both situations, Amazon’s response was reasonable and because they acted within temperance they are seen as a virtuous company.
Ethics Case Controversy
$75.5 Billion in revenue Amazon made in their first quarter of 2020. During that first quarter, a global outbreak called Coronavirus 2019 had made its way into the United States. The virus alone had begun to spread rapidly infecting millions of people. People were not prepared for this type of situation or even how to handle it. The United States Government caused the American people to panic. The United States government began to shut down cities, towns, and all nonessential businesses such as, malls, salons, movie theatres and restaurants. People were believing that stores would then shut down because this virus was becoming uncontrollable and the fact that this virus can spread through the air (airborne) really scared people. Grocery stores had soon become limited on products because people had begun overloading on food, household supplies and many other things so they can quarantine. Quarantining is when you isolate yourself in your home for a period of time. In result, there had become shortages on food, house hold supplies, cleaning supplies and many other items. With the demand of these items that people could not find in stores, people were turning to the internet for the necessities.
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| Over priced hand sanitizer |
Amazon, a place where you can find everything for a decent price or even cheaper than instore had begun to see an increase in price for certain products. The demand for N-95 mask, hand sanitizer, disinfecting wipes, and many other products that will help protect you from the virus had now become impossible to find. Amazon had begun seeing third parties who sell the particular items such as N-95 mask, hand sanitizer, disinfecting wipes and latex gloves raise their prices as much as 3-4x times or more than what it cost a month ago. Some face mask was being sold for $195.00 compared to original prices at $24.99 for a 20 box of them. Hand sanitizer was another price gouged product in which the original cost varies between $20.87 and $35.00 to astronomical price of $79.99 to $129.99 for 2-liter bottles of named brand hand sanitizers.
Price gouging is when a seller attempts to take advantage of the customer by selling them something more than 20% of what the original cost was because of a disaster such as the pandemic and the demand for the product is higher than usual. Price gouging laws vary by state some may not have price gouging laws at all but when a state governor declares a state of emergency the enactment of the price gouging laws go into effect immediately.
Price gouging face mask
When the CDC had then posted guidelines about how to protect yourself from the virus. Some of the most important part of the guidelines the CDC put out were to avoid close contact with others, wash your hands constantly, use and carry hand sanitizer, wear a face mask in public and at work. Keeping a safe distance of six feet between yourself and others. Cleaning surfaces before and after you touch them by using disinfecting wipes will also help kill the bacteria within the virus. The most important thing a person can do as well is to monitor your health daily and compare your symptoms as to what the COVID symptoms are. On the CDC website it states, “Avoid touching your eyes, nose and mouth with unwashed hands”. The CDC stands for Center for Disease Control and Prevention. The CDC is the nation’s health protection agency; they help save lives and as well protect people’s lives from health threats. The CDC is also funded by the U.S congress with annual budget of $11.1 billion a year.
Amazon a company that makes an average $638.1 million dollars were called on by the U.S senators and the attorney general to act against these third-party companies.
Amazon than begun to implement stronger policies, that will help prevent these-party sellers from taking advantage of customers during a pandemic. Amazon had begun to ban and suspend certain third parties that were price gouging the high in demand products. Amazon had sent out messages to more than 3,900 third-party sellers informing them that they are being banned for what they are doing or have done that now goes against a new policy called “Fair pricing policy. “Amazon defines their “fair pricing policy” as sellers need to be responsible for setting their own prices, “setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon”. Violating any part of the fair pricing policy may result in Amazon’s ability to remove the buy box, offer, suspend the account, or even terminating the seller’s account.
Amazon has also removed third party companies that were selling fake products that had claimed it could prevent the virus or even cure COVID-19. Amazon had begun to crack down on these third-party companies removing tens of thousands of items due too false claims about a product and price gouged products. The reason why Amazon has implemented the fair pricing policy is to protect the customer’s trust in fair pricing of products and that they shouldn’t be paying for a product that is higher than what it did cost prior to the increase of demand for the product.
Amazon has been targeting these third-party businesses since the beginning of the outbreak and because they could harm the trust of its customers and when their company is on the line of being known to sell fake products and go against laws that enactment of price gouging laws it can damage their reputation and many customers will lose their trust in them and cancel their Amazon account. For instance, in result three companies Mobile Rush, EMC Group and Northwest- Lux were fined by a New York attorney for price gouging hand sanitizer’s and selling more than 1,000 units at prices that were 10% to 50% more than the original cost because the product was in high demand, they believed that they could charge customers because they think that they can and get away with it.
Stakeholders
Amazon is the major stakeholder and because of the popularity that amazon does currently have it is more beneficial for amazon to do whatever is necessary to maintain a good image as a major cooperation. The next stakeholders are most definitely the customers because they are the ones that are being treated unfairly and being taken advantage of the third-party sellers. Third party sellers are the next ones who are stakeholders because they have something to lose especially having the ability to sell on amazon and if they lose their ability to sell on the platform them and Amazon will not be able to profit legitimately. There are also people who invest (stockholders) into the company and when a company is losing money because their reputation is on the line people will sell their stocks and go elsewhere which will in turn hurt Amazon.
Individualism
When analyzing this case under Milton Freidman’s individualism he expresses that “the only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders within the law of the land”. (M. Freidman) Friedman’s theory is saying that when a business is profiting lawfully, they are doing it with in good faith, but if they are not maximizing profit within the law then they are going against the theory of Individualism. Laws that are set in place that become active in result of an emergency the theory of individualism applies to it as well because it is considered a law. When these third-party sellers begun price gouging their products by more than 10% than the original cost it was breaking price gouging laws. In Massachusetts for instance, “Selling any petroleum product” at an unconsciously high price during any market emergency” is considered price gouging and could result in “a civil penalty of $5,000 per violation.” In result to these third companies were being fined by the state they may have also lost their privileges to sell on Amazon’s marketplace. Amazon’s ability to stop the profit of those sales that were going against the price-gouging laws made this theory of individualism favor with Amazon. Individualism’s ethical theory would have disagreed if Amazon had not stopped these third-party sellers and allowed them both to profit while price-gouging their products.
Tibor Machan’s view on individualism differs from freedom’s ethical theory based on the fact that Friedman’s “is overly restrictive to business owners and sometimes limits long-term profits that enable owners to determine whether they want to spend money and resources in ways that will detract from profits” (Salazar 17). Machan’s views are more lenient and tend to favor the business side a little bit more but as long as they are doing it within the law. Even though Machan’s theory is less strict these third-party sellers are not operating within the law therefore Machan’s view would not approve of these companies’ behavior in price gouging their products and selling fake products.
Utilitarianism
Maximizing happiness for in all that are involved is an important aspect of what it takes to operate a business that rely heavily on the support of consumer consumption. Transparency in between the business and its customers determine the success of the company’s ability to become successful. In the mist of this pandemic there have been many problems like businesses taking advantages of their customers by selling them overpriced necessities that help fight and protect themselves from contracting the virus.
Third-party sellers have been taking advantage of amazon customers looking for last resorts of masks, hand sanitizers, latex gloves, and other things such as disinfecting wipes. So, many stores were cleaned out, but Amazon’s third-party sellers were able to get the product or even produce their own product for a higher price which really caused hurt and turmoil for people that really needed these products, and they were unable to afford them because these third-party sellers were selling them at top dollar. For instance, at one-point face masks in March of 2020 were being sold at $195.00 So, the question is whose happiness is really being maximized? is it just the sellers and not everyone because that would be egoism? According to the Ethical rule “business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action” (Salazar 17).
When these third-party sellers had begun to raise their prices on products that customers really needed it had resulted in unhappy customers, the government, and Amazon. If the product had been sold at a normal price the seller would remain happy as they received a sale but the importance of this is the customer’s overall happiness. Another problem was that third party sellers were being untruthful to Amazon customers stating that their product could prevent or even cure the virus. In conclusion these third-party sellers did not seem to care about the happiness of its customers rather more focused on their own happiness by taking advantage of the customers and not caring about their happiness in regard to pricing of the product and fake product claims saying it may cure the virus. Therefore, third-party businesses did not aim to maximize the happiness of its customers long term because the businesses action was seen as going against the view of Utilitarianism.
Kantianism-
Kantianism is more modern of the ethical theories “it does not make decisions based on consequences, but rather on what Kant calls the Good Will” (Salazar 17). When applying Kantian’s Formula of Humanity, he states that you should “act in such a way that treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means” (Kant, MM 429). What Kantian is trying to say that do not use someone to get what you want. Kantianism recognizes people as if they are valuable and says that if you use someone or something that is of value to get what you need or want then you are simply using them as a means. When applying the Kantian’s ethical theory to this case he would agree that these third-party sellers are using its customer’s a means by not telling the customer the truth regarding the products ability to cure the virus and in this case, they would not pass the test therefore they are impermissible.
Kantian also goes further into detail and has four basic principles including being rational, not to be inconsistent or think you are exempt from the rules, also to guide others to make rational decisions, respect others and to be motivated by goodwill and to do what is right because it is the right thing to do. When Kantian analyzes this case, he applies his theories to evaluate an action and in the case of third-party sellers and their ability to respect the customers, as well as amazon’s platform by doing the right thing and that right thing is to not sell products at an unusual price or even a product that doesn’t work. Amazon’s part in this matter they resort to doing right by the customers by removing the products as well as the overpriced products that go against company’s policy. These third-party companies believed they were exempt from the rules when they were price-gouging their products on Amazon’s platform. In conclusion these third-party sellers were acting irrational and inconsistent of Kantian’s ethical theory. Kantian’s theory would side with Amazon’s decision to remove and suspend those accounts who are inconsistent with the basic principles of Kantianism.
Virtue Theory
In order for one to be Virtuous it must contain all aspect of Honesty, Courage, Justice, and temperance. Amazon was the only ones being honest with not just the customers but also with the third-party sellers by being upfront with them about what they were doing and sending them a message in regard to why their seller account was being removed or suspended from the platform. On, the other hand third-party customers were not being honest with their products they were offering to customers advertising fake products that knowingly didn’t actually cure or prevent the virus. Amazon again is the only one having the courage to be upfront about the situation and to put a halt to these prices gouging transactions and selling of fake products and reprimanding the third-party sellers because they deserve it for trying to take advantage of the customers and their needs. What is seen here is that so far amazon is being virtuous, and the third-party sellers are not. When it comes to justice the question remains because so far, the virus is still going on there seems to be the problem that sellers are able to appeal the decision that amazon has made to remove their account or suspend it. The justice for Amazon was served but these seller accounts are able to find loopholes such as creating new seller accounts to get back into selling again and when they start off with price gouging and selling fake products, they will end up in result makes it unjust.
Although, Amazon is still fighting it as much as possible it is difficult because of how many third-party sellers are. Concluding with what it means to be temperance it has to do with desires, expectations of one and for it to be reasonable. Can we say that the third-party sellers are being reasonable in any with its customers such as pricing for the product, selling them fake products or even having reasonable desire to do right. The last virtue theory temperance would not agree with the behavior of the third parties because they showed no self-restraint when it comes to being reasonable with the pricing of their products during a pandemic especially when the products were in such high demand.
These third parties had no desire to act accordingly especially when some sellers were selling fake products that claimed it could cure or prevent the virus. Amazon profits off these third-party sellers but because of their ethical values and their desire to be a reasonable company that acts responsible as a company they would rather lose out all for keeping trust within the customers. In conclusion, amazon became temperate for the sake of the customers trust and willingness to want them to pay what it should cost for the product. In conclusion Amazon’s actions, had shown what it takes to be a Virtuous business by showing what it means to be honest, courageous, seek justice and be temperate all at the same time.
2020 Price Gouging COVID-19 Timeline
Justified Ethics Evaluation
Amazon’s ability to do what is right for the customers really surprised me especially how they became really addiment about how they want to be perceived as a company. I agree with how Amazon handled the situation with the party sellers. Amazon likes offering lower prices than most other competitors because they are able to make more sales that generate more revenue for the company. Even though Amazon makes less profit they make more money than other businesses in the same industry. The way Amazon conducts business with the customers are generally transparent but when the customers purchase through a third-party the transparency tends to lack even when it is on amazon’s platform. In my opinion Amazon acted ethically within the four ethical theories.
Ethical theory Individualism concludes to maximize profit within the law of the land. Amazon had proven they were serious about how they profit within the law of the land and any seller on their platform must follow their policies and laws in regard to profiting legally. Evaluating Amazon as a whole they were able to pass the theory of Utilitarianism which focuses on maximizing happiness and what amazon had the ability to do was protect the customers happiness by not allowing third parties to scam, lie, manipulate its customers which would affect their majority of people and their happiness. In conclusion and evaluation of Immanuel Kant’s ethical theory of Kantianism he looks at people with of value and that no such person should be used as a means to get what they want. Also, that evaluating the actions from goodwill which are being rightly motivated and right rational. We discussed his four basic principles and which I whole heartly agree with the ethical theory of Kantianism. Especially doing the correct thing in this case Amazon did and therefor their action was permissible. When they created the policies, suspended or removed the third-party accounts they passed the test of Kantian’s ethical theory of Kantianism. I agree with the outcomes of amazon’s actions taken against the third-party companies because I am an amazon customer, and I wouldn’t appreciate purchasing a fake product that claimed it can cure the virus or to buy a mask that is $195.00. In conclusion, the ethical decision’s Amazon made were justified by their actions.
Action Plan
The current issue is that third-party sellers are price gouging certain products during a pandemic where millions of people are losing their jobs and unable to afford certain necessities and what these third-party sellers are doing is raising the prices on these products where it becomes too expensive to afford. It is still currently happening with products even with lack of discounts on products. Scarcity is real and so many people are going broke just trying to buy food, and other household supplies because the stores don’t have the products. These third-party companies are able to sell these necessary items online but for huge markup because they know they know people are in desperate need of these products. The issue is that these third-party companies are able to sell anywhere on the internet even if the price-gouging laws are in effect.
The first thing that can be done to resolve this current issue is to set restrictions for the third-party sellers online. Create laws for these third-party sellers where they are controlled by government. Create a limited space for third-party sellers and their ability to sell anywhere they like. Setting price comparisons on the products to prevent price gouging. For all products that are manufactured need to be approved by the FDA or other types of legislative authority in order to sell online. The results of these actions could help prevent future problems with third parties having the freedom to price-gouge their products and selling products that are proven false results. In the case of Amazon, they have followed through with creating the fair pricing policy which limits third-party sellers the ability to price-gouge their products and sell fake products. Amazon also included consequences for those that violate the policy which would be investigated thoroughly, reviewed and then a decision will be made to either suspend or remove their account. The steps that Amazon had done to deal with this situation was a smart move to protect its customer’s trust.
Although there are many third-party sellers, I am going to focus on a mission statement that would be great for Amazon would be “Our transparency connects us with the world, offers unlimited safe products and services, fulfilling the customers every need, in every success story “transparency leads to Profitability” “A to Z leads unlimited possibilities.” Amazon’s current mission statement is long and forgetful. “We aim to be Earth’s most customer centric company. I believe my statement differs from theirs’s is that they also include “empower businesses and content creators to maximize their success.” (Amazon). It really speaks more to the businesses and telling them to do whatever they want to maximize their success. Amazon’s mission statement doesn’t seem customer based and to maximize their happiness over the businesses. If there were some core values that Amazon could incorporate were to transparent, honest, reliable, trustworthy and commitment to customers. While the company is one of the largest in the world, they could become more transparent with the customers about how these third-party sellers are able to sell on their website, as well be more honest with not just the customers about their affairs but letting the customers know that these third-party sellers are trying to sell fake items and overpriced items. If Amazon were to become committed to its customer over its third-party sellers, they would be more trustworthy.
There could be some major improvements for Amazon’s ability to market their trusted third-party sellers as to incorporate some sort of verification approval within their seller account to show their authenticity. Amazon could advertise the third-party companies that are good companies and help them become more profitable. With the help of all the core values that Amazon would obtain it could make room for more loyal customers. Amazon would have gained the trust and reliability of new customers by becoming a more reputable company that does right by its customers. As Amazon continues to commit being transparent with its customers, they are able to become even more successful than they already are. With the company becoming more accepted as ethical customers will have a harder time finding other companies that are more trustworthy.
References
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Palmer, Annie. “Jeff Bezos Is Now Worth More than $200 Billion.” CNBC, CNBC, 26 Aug. 2020, www.cnbc.com/2020/08/26/amazon-ceo-jeff-bezos-worth-more-than-200-billion.html.
https://www.cnbc.com/2020/08/26/amazon-ceo-jeff-bezos-worth-more-than-200-billion.html
Dayton, Emily. “10 Fascinating Amazon Statistics Sellers Need To Know in 2019.” The BigCommerce Blog, 6 Nov. 2020, www.bigcommerce.com/blog/amazon-statistics/.
https://www.bigcommerce.com/blog/amazon-statistics/
Palmer, Annie. “Amazon Sellers Fined for Price Gouging Hand Sanitizer amid Coronavirus Pandemic.” CNBC, CNBC, 17 Nov. 2020, www.cnbc.com/2020/11/17/amazon-sellers-fined-for-coronavirus-price-gouging-hand-sanitizer.html.
“How to Protect Yourself & Others.” Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html
“GP.” Amazon, Goettsche Partners, 2011, sellercentral.amazon.com/gp/help/external/G5TUVJKZHUVMN77V.
https://sellercentral.amazon.com/gp/help/external/G5TUVJKZHUVMN77V
Salazar, Heather. The Business Ethics Case Manual
Images Source Reference -
https://www.vox.com/recode/2020/3/5/21164622/coronavirus-amazon-hand-sanitizer-price-gouging
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