Is eBay Utilising the Corona Virus Crisis to Impose Monopoly and make Gains unethically?

“Because this item is susceptible to price gouging, it may be sold only by authorized sellers. Do not relist this item”. This is what pops up on your screen if you dare to try to sell a new product perceived as essential on eBay. However, is eBay seriously trying to eliminate price gouging? What’s its anti-price-gouging approach? Is it practically effective within the marketplace dynamics? Or, is it an immoral slogan aimed at gaining benefits from Covid19?

Crisis Opportunists

Unfortunately, with the advent of the pandemic earlier this year, some dodgy sellers disgracefully turned to Price gouging to make extra financial gains immorally. Traditional supply chains of essential items saw abrupt disruption that left many brick and mortar stores out of stock. This paved the way for some crisis opportunists to charge unreasonably high prices for items in high demand. The practise mainly took place on major ecommerce marketplaces including eBay. All of us were of course gutted. A swift response was expected from operators of key online retailing platforms like eBay. So, how did eBay react?

Market Dynamics

Before discussing eBay reaction to the crazy price increase of some essential products on it sown platform, let’s have a look at the dynamics surrounding the scene. Let’s also try to explore eBay’s possible options to eliminate the phenomenon within its contextual logic.

Here are some obvious factors associated with the problem:
 Price gouging was actually practised on eBay.
 As a matter of fact, it was practised by sellers who had already been selling on eBay.
 It lasted for a while and whether deliberately or un-deliberately, eBay allowed it for before it was under increased pressure to act.
 eBay benefited from price gouging in terms of selling fees and other gains.
eBay did not attempt to compensate customers who fell victims to price inflation.

eBay’s Response Options

With that said, what obvious measures eBay could have swiftly applied to stop this notorious behaviour. Well, one doesn’t have to enjoy advanced problem-solving skills to come up with simple solutions like setting reasonable price limits for such items. As a matter of course, this ca be quickly done through eBay’s advanced algorithms. Penalising violating sellers, removing them from the platform, obliging them to refund the extra amounts charged, encouraging more open competition are a few straightforward options to name.
Moreover, it can be justifiably assumed that eBay savvy experts must have had more effective measures to take to prevent the unrightful practise or at lease to stop it at an early stage. Of course, eBay has full control over its platform and algorithms. It can impose restrictions over any seller, product or category which it usually does. However, it obviously didn’t choose to use its available powers in this instance. Instead, eBay adapted a policy that didn’t appear to have addressed the shameful conduct directly.

Price Gouging Policy

In its response to the crisis, eBay decided to only allow “authorized sellers” to sell some
essential items on its site. But, who those “authorized sellers” are and on what grounds
they are authorised. More importantly, does the policy set proper standards to punish price
gougers and allow disciplined sellers based on equal opportunity and fair competition
standards? Does it compensate victims? Has it been able to end price gouging on eBay after
we have passed the initial stage of the pandemic?

You would instinctively think that the best place to find answers to these questions is eBay’s price gouging policy itself. I can’t disagree and here it is. Albeit eBay suggests it’s a 2-minute article, the -single minute-read half a page policy turns out to be too short to answer such questions. It’s very simple but also very vague. The policy clearly states that “Inflating the price of goods in response to an emergency or disaster is not allowed”. It goes on to remind sellers that they “must follow all applicable laws and regulations”. However, the only line that dictates eBay response to price inflation is probably this: “eBay may restrict the sale of items that are susceptible to price gouging behaviour - for example, by only allowing items to be sold by authorised sellers”

Monopoly

This clearly shows that the only action eBay could take was to restrict the sale of Covid19
related items to authorised sellers. The policy doesn’t say anything about who these authorised sellers are nor on what basis would they be the only traders allowed to sell items under high demand. Nonetheless, we know for sure who are not authorised and on what grounds they are not allowed to sell such items. Shockingly, the largest segment of banned sellers has for sure never ever done any price gouging at least on eBay. Well, it’s not that complicated. These are people who have never sold such items on eBay. Not only didn’t eBay penalise existing price inflators on its platform, but it appeared to be protecting them by completely closing the competition circle they are in. This can be legitimately viewed as cartel behaviour which is prohibited by law.

Prejudice Policy

Actually, eBay’s policy is that any new seller is prejudicially a price gouger regardless of the price it intends to have for its product. The quality and standards of the product and the seller’s business don’t appear to be relevant to eBay. Ultimately, new sellers with legally authorised businesses, decent background in the industry, perfect quality products and competitive prices are banned on eBay based on the assumption that they will certainly inflate prices. This is not a guess. It has been confirmed by eBay and here is a documented reply from eBay’s customer service to someone who dared to ask to be added to eBay’s  authorised sellers list: “I certainly understand that your intentions are very genuine in this case, but currently there is not a process for sellers to apply to be an authorized seller for these items.”

Cartel Behaviour

eBay insists that the aim of its price gouging policy is to “ensure buyers are able to find essential items at reasonable prices, and that important government regulations and guidelines are followed”. Needless to say that myriad economic, academic and legislative sources maintain that fair and open competition benefits consumers and contributes to reducing prices. On its websites, the UK government urges firms to comply with the UK and EU competition laws. The UK Competition Act 1998 prohibits “anti-competitive conduct”, “monopoly” and “cartel offence”.

Interpretation

I don’t claim to have evidence-based information about the benefits of eBay from restricting the sale of highly demanded products to a closed group of sellers. However, eBay’s approach justifiably opens the doors wide for interpretations. The perceived bias in authorising and banning sellers can be seen as violating fair competition and equal opportunity standards and regulations. A quick review of the “authorised sellers” sales on eBay may have something to tell. Each member of this privileged group sells thousands of items. Prices are not always reasonable and the range of differences among prices show that they’re not really controlled.

Unethical Gains

Nonetheless, the key indication here is that these are big players who are certainly paying eBay much higher fees than what new comers would have paid. The charges eBay levies on such mega online stores coupled with the fees on their multiplied sales thanks to eBay policy could be a viable drive for this approach. New sellers don’t pay high fees for large eBay stores they don’t yet have. Additionally, they already have limits for the number of items they can sell. Let business ethics alone for now, we’re in a crisis and we need to make the best of it. Mega stores with ultrahigh sales simply mean maximum benefits from the crisis. Sounds like a plausible interpretation provided morality is shelfed for the time being.

Malek Kashkara MBA