Price Gouging, the Amazon
Marketplace, and the Dormant
Commerce Clause
JULIA LEVITAN
*
This Note argues that states can regulate price gouging on the Amazon
Marketplace without offending the dormant commerce clause. Part I
provides an overview of state price gouging statutes and enforcement efforts.
Part II examines the reported price gouging, including on the Amazon
Marketplace, in connection with the COVID-19 pandemic. Part III explains
the dormant commerce clause jurisprudence, with a particular emphasis on
the doctrine’s application to state laws governing internet activities. Part
IV considers the dormant commerce clause implications of regulating price
gouging on the Amazon Marketplace and concludes that state price gouging
laws can be enforced against both Amazon and its third-party sellers
without violating the dormant commerce clause. Part IV also places the two
enforcement targets in an optimal deterrence framework and identifies
Amazon as the ideal regulatory target to effectuate robust enforcement of
price gouging prohibitions.
* J.D. 2022, Columbia Law School. I would like to thank Professor Gillian Metzger
for her invaluable insights and support. Many thanks also to the JLSP staff for their
excellent editorial assistance. All errors are my own.
374 Columbia Journal of Law & Social Problems [55:3
INTRODUCTION
As COVID-19 swept across the globe in early 2020, soaring
prices of health-related products commanded national attention—
$40 for a package of disposable face masks; $35 for a single bottle
of hand sanitizer.
1
Responding to public outrage, state law
enforcement officials vowed to investigate and prosecute the
unscrupulous sellers engaged in price gouging in both brick-and-
mortar and online storefronts.
2
Prices remained stubbornly high
for months, including and especially on the Amazon Marketplace.
3
Price gouging, the unlawful raising of prices during an
emergency or other market disruption, has long been the province
of state regulatory authority.
4
The diversity of state approaches to
addressing price gouging has produced a regulatory patchwork
with significant jurisdictional variation.
5
All jurisdictions, though,
provide ineffective mechanisms for enforcement—a phenomenon
that was brought to the fore during the COVID-19 pandemic.
6
Recent underenforcement problems may be attributable to
constitutional concerns. In June 2020, a federal district court
enjoined the state of Kentucky from enforcing its price gouging
laws against in-state third-party sellers on the Amazon
Marketplace, holding that such an application violates the
dormant commerce clause.
7
Although the decision was vacated on
appeal by the Sixth Circuit, the district court decision sent shock
waves across the states and led some to fear that the court’s
1. See PUBLIC CITIZEN, PRIME GOUGING: HOW AMAZON RAISED PRICES TO PROFIT
FROM THE
PANDEMIC 12–13 (Sept. 9, 2020), https://www.citizen.org/article/prime-gouging/
[https://perma.cc/E6UQ-U6B8] [hereinafter “P
UBLIC CITIZEN”].
2. See Alina Selyukh, ‘Stop Price Gouging,’ 33 Attorneys General Tell Amazon,
Walmart, Others, NPR (Mar. 25, 2020), https://www.npr.org/sections/coronavirus-live-
updates/2020/03/25/821513190/stop-price-gouging-33-attorneys-general-tell-amazon-
walmart-others [https://perma.cc/DTY5-YDXZ].
3. See P
UBLIC CITIZEN, supra note 1. Amazon both sells products directly (as an online
retailer) and functions as a marketplace for third-party sellers. See Sophia Spiridakis, What
Is Amazon Marketplace? Everything You Need to Know About the Platform, S
ELLER’S
CHOICE (Mar. 20, 2020), https://www.sellerschoice.digital/blog/what-amazon-marketplace
[https://perma.cc/W8K9-7Z2N].
4. See generally Note, Caitlin E. Ball, Sticker Shock at the Pump: An Evaluation of the
Massachusetts Petroleum Price-Gouging Regulation, 44 S
UFFOLK U. L. REV. 907, 912 (2011);
see also Note, Emily Bae, Are Anti-Price Gouging Legislations Effective Against Sellers
During Disasters?, 4 E
NTREPRENEURIAL BUS. L.J. 79 (2009).
5. See Bae, supra note 4, at 83.
6. Id.
7. Online Merchs. Guild v. Cameron, 468 F. Supp. 3d 883, 901 (E.D. Ky. 2020),
vacated, 995 F.3d 540 (6th Cir. 2021).
2022] Price Gouging and the Amazon Marketplace 375
reasoning could sound the death knell for robust, or indeed any,
regulation of price gouging on online retail platforms.
8
The purpose of this Note is to deflate the concerns that the
dormant commerce clause prevents states from regulating price
gouging on the Amazon Marketplace.
9
Further, this Note argues
that state price gouging laws can be enforced against out-of-state
third-party sellers—and against Amazon itself—without violating
the dormant commerce clause.
This Note proceeds in four Parts. Part I surveys the landscape
of state price gouging laws. Part II examines the Amazon
Marketplace: its architecture and role in price gouging during the
COVID-19 pandemic. Part III explains the dormant commerce
clause doctrine, a notoriously convoluted area of constitutional
law. It first introduces the dominant analytical framework
established by the Supreme Court. It then explores the
complicating factor of the extraterritoriality principle and the
application of this principle to state regulation of internet activity.
In so doing, Part III reconciles the various threads of the dormant
commerce clause doctrine and argues that the doctrine, properly
understood, presents no categorical bar to state regulation of
online price gouging. Finally, Part IV analyzes the application of
state price gouging laws to third-party sellers and to Amazon
directly, and concludes that the dormant commerce clause is not
violated by either application. Drawing on optimal deterrence
8. See PUBLIC CITIZEN, supra note 1, at 10 (“[T]he court held that the Kentucky price
gouging law is likely unconstitutional because it attempts to regulate prices outside of
Kentucky. This decision ultimately could prevent any state price gouging law from applying
to online sales platforms such as Amazon.”).
9. Id. at 11 (explaining that the dormant commerce clause “could prevent any state
price gouging law from applying to online sales platforms such as Amazon”; arguing that
Online Merchants Guild highlights the need for a federal, rather than state, approach to
price gouging regulations); J
ONES DAY, WHITE PAPER: AVOIDING PRICE-GOUGING PITFALLS
WHILE NAVIGATING PRICE INCREASES IN THE ERA OF COVID-19 at 9 (Aug. 2020),
https://www.jonesday.com/-/media/files/publications/2020/08/avoiding-price-gouging-
pitfalls-while-navigating-price-increases-in-the-era-of-covid19/files/avoiding-pricegouging-
pitfalls/fileattachment/avoiding-pricegouging-pitfalls.pdf [https://perma.cc/M4GA-PYAQ]
(citing Online Merchants Guild in noting that “the extraterritorial application of a price-
gouging statute has raised constitutional issues in past cases and may render the entire
statute void”); W
ILMERHALE, COVID-19: STATE AND LOCAL LAW ENFORCEMENT TARGETS
PRICE-GOUGING PRACTICES (Mar. 31, 2020), https://www.wilmerhale.com/-/media/files/
shared_content/editorial/publications/wh_publications/client_alert_pdfs/20200331-covid-
19-state-and-local-law-enforcement-targets-price-gouging-practices.pdf [https://perma.cc/
L2Y6-ZSU4] (noting the Fourth Circuit’s determination that the dormant commerce clause
is a constitutional bar to some state price gouging regulations).
376 Columbia Journal of Law & Social Problems [55:3
theory, this Part identifies Amazon as the ideal enforcement target
for efficacious regulation of online price gouging.
I. PRICE GOUGING REGULATIONS AND ENFORCEMENT
Price gouging is regulated at the state level.
10
States regulate
price gouging through specific anti-price gouging statutes, broader
consumer protection laws, and executive orders.
11
In most states,
price gouging laws come into effect when they are “trigged” by a
state authority’s declaration of emergency.
12
An increase in price
in non-emergency contexts is, of course, perfectly lawful—but an
otherwise lawful price increase can become unlawful price gouging
during a state of emergency.
Statutory definitions of price gouging, which vary across
jurisdictions, fall into three broad categories: the “unconscionable
increase” bans, the “percentage increase” caps, and the “outright”
bans.
13
Most state price gouging laws fall within the
“unconscionable increase” category, wherein an increase in price
constitutes unlawful price gouging if it is “unconscionable.”
14
Some
states have attempted to clarify the meaning of “unconscionable,”
either by defining the term as a “gross disparity” between the
original and increased prices before and after the declaration of an
emergency or by providing that a specific percentage increase in
price constitutes prima facie evidence of unconscionability.
15
The
10. See Bae, supra note 4, at 83.
11. See, e.g.,
CAL. PENAL CODE § 396 (West 2022) (specific price gouging statute); DEL.
CODE ANN. tit. 6, § 2513 (2020) (broader consumer protection law); MINN. EXEC. ORDER 20-
10 (Mar. 20, 2020), https://www.leg.mn.gov/archive/execorders/20-10.pdf [https://perma.cc/
2VRV-MABG] (executive order).
12. See COVID-19 Survey of Federal and State Price Gouging Laws, K
ING & SPALDING
(last visited Mar. 4, 2021), https://www.kslaw.com/pages/covid-19-survey-of-federal-and-
state-price-gouging-laws [https://perma.cc/8Y3V-5BH2]. Note that Michigan is the only
state with a price gouging law that is not conditioned on a declaration of emergency. See
M
ICH. COMP. LAWS § 445.903 (2021).
13. See Bae, supra note 4, at 83.
14. See K
ING & SPALDING, supra note 12. This “unconscionable” language has been
expanded upon by a number of states, including Alabama, Colorado, Florida, Idaho, Illinois,
Indiana, Iowa, Maine (rebuttable presumption that a price is unconscionable if it exceeds,
by more than 15%, the pre-disaster prices factoring in any higher costs), Massachusetts,
Missouri, New Mexico (under unfair practices act price gouging is “unreasonably
increasing” the price from pre-emergency to post-emergency), New York (gross disparity),
North Carolina (considerations for unconscionable increase include any increase, akin to an
outright ban), Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont,
Virginia, and Wisconsin. Id.
15. See, e.g.,
ALA. CODE § 8-31-4 (2021) (25% price increase constitutes prima facie
evidence of unconscionability); 73 P
A. CONS. STAT. § 232.4 (2022) (20% price increase
2022] Price Gouging and the Amazon Marketplace 377
second category—“percentage increase” caps—define price
gouging as a percentage increase in price during an emergency
relative to the pre-disaster price.
16
These percentage increases
range from 10% to 15%, depending on the state.
17
Finally, some
state price gouging laws are “outright bans” that bar any increase
in price following an emergency declaration.
18
Moreover,
considerable variation exists within each definitional category as
to the goods and services covered by the law; some laws are
narrowly tailored to specific products, while others apply
indiscriminately to transactions of any good or service within the
emergency area.
19
All state prices gouging laws compare the price charged during
the emergency to the price charged before the emergency; however,
there is no universal standard by which states determine a
product’s pre-emergency price.
20
Some states define the pre-
emergency price as “immediately” prior to the emergency
declaration, while other states use the price charged seven, ten, or
even thirty days prior to the declaration.
21
These temporal
differences can be significant because the market often responds
to a forecasted event before a state’s price gouging laws are
constitutes prima facie evidence of unconscionability). Note that this definition of
“unconscionable” brings these “unconscionable increase” laws closer to the “percentage
increase cap” model.
16. See Bae, supra note 4, at 83.
17. See, e.g., C
AL. PENAL CODE § 396 (West 2022) (“Upon the proclamation of a state of
emergency . . . it is unlawful . . . to sell . . . for a price of more than 10 percent greater than
the price charged . . . immediately prior to the proclamation or declaration of emergency.”);
A
RK. CODE ANN. § 4-88-303(A)(1) (2021) (10% cap); KY. REV. STAT. ANN. §§ 367.372–367.378
(West 2022) (10% cap); M
E. STAT. tit. 10, § 1105(3) (2021); N.J. STAT. ANN. § 56:8-108 (West
2021) (10% cap); O
KLA. STAT. tit. 15, § 777.4(A) (2021) (10% cap); OR. REV. STAT.
§ 401.965(3) (2021) (15% cap); W.
VA. CODE § 46a-6j-3(A)–(B) (2022) (10% cap).
18. See Bae, supra note 4, at 90. Hawaii, Connecticut, Georgia, Louisiana, and
Mississippi all have “outright ban” laws. Id.
19. See generally Matt Zwolinski, The Ethics of Price Gouging, 18 B
US. ETHICS Q. 347,
349 (2008) (outlining the various formulations of price gouging in state statutes). Compare
L
A. REV. STAT. ANN. § 29:732(A) (2019) (applies to “goods and services sold within the
designated emergency area”), with A
LA. CODE § 8-31-4 (2021) (applies to goods and services
“necessary for consumption or use as a direct result of the emergency”).
20. See J
ONES DAY, supra note 9, at 2; see also Bae, supra note 4, at 85.
21. See, e.g., V
T. STAT. ANN. tit. 9, § 2461d(b) (2022) (referring to price charged in the
“usual course of business immediately prior to the market emergency”); A
RK. CODE ANN.
§ 4-88-303(d) (2021) (referring to price charged “immediately prior to the proclamation of
the emergency”); V
A. CODE ANN. § 59.1-527(1) (2022) (referring to the price charged during
the ten days immediately prior to the disaster); 73
PA. CONS. STAT. § 232.3 (2022) (referring
to price charged during the seven days immediately prior to the state of disaster or
emergency); F
LA. STAT. § 501.160(1)(b) (2021) (referring to price charged during the thirty
days immediately prior to the state of emergency).
378 Columbia Journal of Law & Social Problems [55:3
activated by the declaration of a state of emergency by the
appropriate authority.
22
For example, steep price increases for
essential goods on the Amazon Marketplace began as COVID-19
spread in other countries—well before the first declaration of a
state of emergency in the United States.
23
These price increases
did not constitute unlawful price gouging because they occurred
prior to the declaration of emergency in the regulating jurisdiction.
State price gouging statutes also differ in the amount of time
that they are in effect. Some statutes provide that the pricing
restrictions will remain in effect for a limited period of time after
the emergency declaration, subject to extensions by the state’s
governor or legislative body.
24
Other price gouging laws are
coterminous with the length of the state of emergency.
25
Still
others apply during the state of emergency and for a statutorily
defined period of time thereafter.
26
Additionally, the geographical scope of a state’s price gouging
law depends on the nature of the declared emergency.
27
The
COVID-19 pandemic is unique because the virus triggered
emergency declarations throughout the country—all fifty states
and the District of Columbia issued declarations.
28
But usually a
state’s declaration of emergency responds to particular conditions
22. See KING & SPALDING, supra note 12.
23. See U.S.
PUB. INT. RSCH. GRP. EDUC. FUND (finding that the average price of
surgical masks and hand sanitizer in February 2020 was 18.5% higher than the previous
three-month average, even before the first state of emergency in the U.S. was declared in
March).
24. For example, the governor of Illinois declared a state of emergency on March 9,
2020 that was effective through April 30 of that year. Ill. Gubernatorial Disaster
Proclamation (Mar. 9, 2020), https://www2.illinois.gov/sites/gov/Documents/Coronavirus
DisasterProc-3-12-2020.pdf [https://perma.cc/4C8A-ELLK]. The governor issued
subsequent proclamations extending the state of emergency in thirty-day increments. Ill.
Exec. Order No. 2022-07 (Mar. 4, 2022), https://www.illinois.gov/government/executive-ord
ers/executive-order.executive-order-number-07.2022.html [https://perma.cc/XBF9-46S9].
The Arkansas price gouging provision applies for thirty days after the declaration of
emergency—a period that can be extended for additional thirty-day periods by the
legislative body governing the affected area. A
RK. CODE ANN. § 4-88-303(a), (c) (2021).
25. See K
AN. STAT. ANN. § 50-6, 106(b)(2) (2021).
26. See, e.g., N.J.
STAT. ANN. § 56:8-109 (West 2021) (price gouging prohibition remains
in effect for duration of the state of emergency and for thirty days after the emergency has
ended).
27. See J
ONES DAY, supra note 9.
28. See States’ COVID-19 Public Health Emergency Declarations and Mask
Requirements, N
ATIONAL ACADEMY FOR STATE HEALTH POLICY (last visited Mar. 25, 2022),
https://www.nashp.org/governors-prioritize-health-for-all/ [https://perma.cc/B9V3-X4DR].
2022] Price Gouging and the Amazon Marketplace 379
only affecting a part or the whole of the state and may be
accompanied by similar declarations in nearby states.
29
Despite the variation across states, these price gouging laws
share the common goal of consumer protection.
30
States prohibit
price gouging in order to protect consumers from sellers that see
disaster as an opportunity to charge excessive prices for essential
goods and services during a state of emergency.
31
The regulations
also effectuate an equitable allocation of essential goods between
high- and low-income consumers during periods of disasters.
32
Whereas jurisdictional approaches to statutory proscribing
price gouging are varied, state enforcement mechanisms are
largely uniform. Consumers are the first level of the enforcement
process.
33
Consumers submit complaints of price gouging through
telephone hotlines or online portals.
34
The state attorney general
29. For example, widespread fires and extreme weather conditions in California in late
2020 prompted Governor Newsom to declare a statewide emergency and issue more tailored
proclamations of emergency for the areas that saw substantial burning. See Press Release,
Gavin Newsom, Governor of California, Governor Newsom Declares State of Emergency in
Napa, Sonoma and Shasta Counties, Requests Presidential Major Disaster Declaration to
Bolster Response to Fires Across State (Sept. 28, 2020), https://www.gov.ca.gov/2020/09/28/
governor-newsom-declares-state-of-emergency-in-napa-sonoma-and-shasta-counties-
requests-presidential-major-disaster-declaration-to-bolster-response-to-fires-across-state/
[https://perma.cc/GH3G-M4XQ]. Contrast this state-specific disaster with the multistate
disaster of Hurricane Katrina in 2005. The states of Alabama, Mississippi, and Louisiana
all issued declarations of emergency in advance of Hurricane Katrina’s landfall. S
ELECT
BIPARTISAN COMM. TO INVESTIGATE THE PREPARATION FOR AND RESPONSE TO HURRICANE
KATRINA, 109TH CONG., A FAILURE OF INITIATIVE: FINAL REPORT OF THE SELECT BIPARTISAN
COMMITTEE TO INVESTIGATE THE PREPARATION FOR AND RESPONSE TO HURRICANE KATRINA
59, 62–63 (Comm. Print 2006), https://www.nrc.gov/docs/ML1209/ML12093A081.pdf
[https://perma.cc/TP7D-LGL4]. After Hurricane Katrina’s landfall, forty-four states
declared emergencies in order to access federal funding to cover those states’ expenses
associated with sheltering the hundreds of thousands of evacuees. Id. at 311.
30. See Michael Brewer, Planning Disaster Price Gouging Statutes and the Shortages
They Create, 72 B
ROOK. L. REV. 1101, 1112–15 (2007).
31. Id. at 1112.
32. See Bae, supra note 4, at 81 n.13; see also News Release, Amy Klobuchar, Senator,
Klobuchar, Blumenthal, Hirono, Cortez Masto Introduce Bill to Prohibit Price Gouging
During Crises (Mar. 25, 2020), https://www.klobuchar.senate.gov/public/index.cfm/news-
releases?ID=543F0E36-672E-46CF-937B-02C4AFD19BB9 [https://perma.cc/GS9Z-WLK4].
In fact, many states enacted their price gouging laws in the wake of natural disasters that
led to price gouging. For example, California enacted its price gouging statute in 1994,
following rampant price gouging in the aftermath of the 1993 Northridge earthquake. See
Bae, supra note 4, at 83–84. Similarly, Georgia passed its first price gouging statute in
1995—after record-breaking floods led to widespread price gouging. Id. at 91.
33. See, e.g., Gary E. Lehman, Price Gouging: Application of Florida’s Deceptive and
Unfair Trade Practices Act in the Aftermath of Hurricane Andrew, 17 N
OVA L. REV. 1029,
1034 (1993); see also Bae, supra note 4, at 84.
34. Widespread price gouging during COVID-19 prompted many states to establish
online portals for consumer complaints. See, e.g., Press Release, Andrew M. Cuomo,
Governor of New York, At Novel Coronavirus Briefing, Governor Cuomo Declares State of
380 Columbia Journal of Law & Social Problems [55:3
then investigates the complaints, though most complaints are
dismissed prior to any investigation for lack of sufficient
information.
35
During an investigation, if the suspected price
gouger can produce evidence showing that the increase in price is
the direct result of a cost increase, the price increase does not
qualify as unlawful price gouging.
36
Those few investigations that
do produce a cognizable claim are often settled without further
legal action by a “Voluntary Assurance of Compliance,” in which
the alleged price gouger agrees to comply with the law and to repay
consumers without admitting guilt.
37
These enforcement practices
involve resource intensive, post hoc investigatory efforts that
result in little to no penalty imposed on the alleged price gouger.
Indeed, the history of price gouging in the United States is
replete with noncompliance and ineffectual enforcement.
Massachusetts’ repeated, failed attempts to crack down on price
gouging of gasoline in the wake of Hurricane Katrina highlight the
structural flaws in price gouging laws and enforcement
mechanisms.
38
In August 2005, gasoline prices increased
nationwide in the immediate aftermath Hurricane Katrina.
39
Massachusetts in particular experienced a rapid and significant
rise in state-wide gasoline prices, which led to concerns of price
gouging among state consumers.
40
The Massachusetts Office of
Consumer Affairs responded “aggressively” to enforce the anti-
Emergency to Contain Spread of Virus (Mar. 7, 2020), https://www.governor.ny.gov/news/
novel-coronavirus-briefing-governor-cuomo-declares-state-emergency-contain-spread-virus
[https://perma.cc/7XTP-8KPN].
35. See Press Release, Dana Nessel, Attorney General of Michigan, AG Nessel
Continues Consumer Protection Work with Price-Gouging Enforcement (May 26, 2020),
https://www.michigan.gov/ag/0,4534,7-359-92297_47203-530050--,00.html
[https://perma.cc/VM7A-GWMV] (“Since early March . . . [Michigan Attorney General’s
Office] has received more than 4,200 complaints about businesses and individuals who are
price-gouging consumers during this crisis, but . . . unfortunately, many do not contain
enough information to verify the complaints as legitimate.”).
36. See Lehman, supra note 33, at 1036; see also Bae, supra note 4, at 84.
37. See Bae, supra note 4, at 88.
38. Id. at 86–87; see also Ball, supra note 4, at 919–20.
39. See Ball, supra note 4, at 907 n.6. Hurricane Katrina caused the immediate loss of
a substantial amount of the U.S. crude oil production and refining capacity. Id. at 907–08.
Gas prices rose nationwide, which led states, such as Massachusetts, to trigger price
gouging laws applied solely to the sale of petroleum products. See Cale Wren Davis, An
Analysis of the Enactment of Anti-Price Gouging Laws 46–47 (Jan. 2008) (M.S. thesis,
Montana State University) (on file with the Montana State University Library),
https://scholarworks.montana.edu/xmlui/bitstream/handle/1/1145/DavisC0508.pdf
[https://perma.cc/JZM8-L6V2].
40. Ball, supra note 4, at 907 n.6, 908 n.7.
2022] Price Gouging and the Amazon Marketplace 381
price gouging laws.
41
The Office established a telephone hotline
for consumers to report price gouging and received hundreds of
complaints in the first two days alone.
42
Although the Office
reported using “significant resources” to investigate consumer
complaints, the Massachusetts Attorney General failed to bring
even one price gouging enforcement action.
43
Massachusetts’
ineffectual response to price gouging in 2005 epitomizes the
problems and inefficiencies plaguing the entire anti-price gouging
regulatory framework today: enforcement actions require massive
regulatory resources, but rarely result in legal action or
meaningful deterrence.
44
II. THE AMAZON MARKETPLACE
As the previous Part has shown, current anti-price gouging
enforcement practices are resource-intensive and inefficacious. A
change in strategy may well be in order. One potential strategic
change is to seek to induce compliance, rather than to focus
exclusively on post hoc enforcement action that, as has been
explained, provides limited deterrent value. Amazon is uniquely
well-positioned to comply with the patchwork of state price
gouging laws because the Amazon Marketplace is centralized and
tightly controlled. Despite this capacity for compliance, Amazon
has exploited enforcement inefficiencies and enabled price gouging
to run rampant on its Marketplace.
This Part will explore the Amazon Marketplace: how it
functions and how it has condoned price gouging during the
coronavirus pandemic. Part II.A explains the structure and
operation of the Amazon Marketplace. Part II.B surveys the
systemic price gouging on the Amazon Marketplace during the
COVID-19 pandemic. Finally, Part II.C describes the efforts of
states to regulate price gouging on the Amazon Marketplace and
evaluates the success of such efforts.
41. Id. at 919.
42. Id. at 920.
43. Davis, supra note 39, at 47.
44. A similar high cost, low benefit enforcement pattern is evident in Missouri’s post-
Katrina price gouging enforcement. There, the state Attorney General received 350
complaints of gasoline price gouging, investigated fifty gas stations, and filed charges
against just one station that had engaged in especially egregious price gouging. Indeed, the
station netted a 400% profit margin increase after the hurricane. Nine other stations
entered Voluntary Assurances of Compliance and paid fines ranging from $500 to $2,500.
Id. at 62. See also Bae, supra note 4, at 88.
382 Columbia Journal of Law & Social Problems [55:3
A. UNDERSTANDING THE AMAZON MARKETPLACE
Millions of Americans use Amazon every day to purchase
household goods, personal care products, groceries, furniture, and
more.
45
Over one hundred million U.S. customers pay subscription
fees to access Amazon Prime benefits, like free two-day shipping.
46
Although Amazon occupies an increasingly central role in daily
life, most consumers know little about how Amazon works under
the hood.
47
Amazon is both a seller and a marketplace. As a seller, Amazon
sells its products directly to consumers, retaining all of the
profits.
48
Amazon also provides a platform for third-parties to
their sell products, taking a cut of the sales—this is the Amazon
Marketplace.
49
Third-party sellers can choose to manage their own
shipping, fulfillment, and customer communications, or they can
opt into the Fulfilled by Amazon (FBA) program, in which Amazon
handles all aspects of fulfillment, including storing, packing, and
shipping.
50
Amazon incentivizes third-party sellers to use its FBA service.
Three incentives are especially significant. First, Amazon Prime
members get free two-day shipping on all Amazon-fulfilled
products.
51
Second, Amazon’s search algorithm prioritizes, among
other factors, Amazon Prime eligibility.
52
A product that is Prime-
eligible is ranked above otherwise identical listings.
53
Third, the
45. Reach Millions of Business Customers, AMAZON, https://sell.amazon.com/programs/
amazon-business.html [https://perma.cc/AR7A-VR8R] (last visited Mar. 1, 2021).
46. Fareeha Ali, Amazon Prime Has 126 Million Members in the US, D
IGITAL COM. 360
(Oct. 26, 2020), https://www.digitalcommerce360.com/article/amazon-prime-membership/
[https://perma.cc/L9GE-8MYW].
47. See Alexandra Berzon et al., Amazon Has Ceded Control of Its Site. The Result:
Thousands of Banned, Unsafe or Mislabeled Products, W
ALL ST. J. (Aug. 23, 2019),
https://www.wsj. com/articles/amazon-has-ceded-control-of-its-site-the-result-thousands-of-
banned-unsafe-or-mislabeled-products-11566564990 [https://perma.cc/6SMH-A4TY]
(“Many of the millions of people who shop on Amazon.com see it as if it were an American
big-box store. . . . In practice, Amazon has increasingly evolved like a flea market. It
exercises limited oversight over . . . millions of third-party sellers.”).
48. See Spiridakis, supra note 3.
49. Id.
50. Id.
51. Id.
52. Julia Angwin & Surya Mattu, Amazon Says It Puts Customers First. But Its Pricing
Algorithm Doesn’t, P
ROPUBLICA (Sept. 20, 2016), https://www.propublica.org/article/
amazon-says-it-puts-customers-first-but-its-pricing-algorithm-doesnt [https://perma.cc/F5
M2-5WAV].
53. 7 Ways to Boost your Amazon Sales Rank in 2021,
EDESK, https://www.edesk.com/
blog/amazon-sales-rank/ [https://perma.cc/Z73S-NUSM].
2022] Price Gouging and the Amazon Marketplace 383
most desirable placement for a product is the so-called “buy box”
that appears at the top of the page as a suggested purchase,
54
which almost always features an Amazon-sold or Amazon-fulfilled
product, even when there are “substantially cheaper offers
available from others.”
55
Amazon rigorously controls and monitors pricing of all products
on the Amazon Marketplace. Dynamic pricing algorithms
automatically adjust prices on its products: pricing is so dynamic
that the average product on Amazon changes price every ten
minutes.
56
Amazon also allows third-party sellers to set their own
dynamic prices through the platform’s tools for pricing
automation.
57
Amazon’s pricing automation tools allow third-
party sellers to automate price increases without any price ceiling,
which is how one otherwise unremarkable book listed on Amazon
ended up priced at almost $24 million.
58
Sellers can also define
automated pricing rules based on the consumer’s shipping
location.
59
The above description of the Amazon Marketplace shows that
Amazon determines the placement of products in customer search
results based, in part, on the customer’s shipping address; employs
sophisticated algorithmic pricing tools to automatically increase
prices ad infinitum; and tailors pricing based on the customer’s
region.
60
Amazon wields substantial control over the entire selling
and buying experience, including by algorithmically setting pricing
based on a number of factors, most significantly the physical
54. Angwin & Mattu, supra note 52.
55. Id.
56. Neel Mehta et al., Amazon Changes Prices on Its Products about Every 10
Minutes—Here’s How and Why They Do It, B
US. INSIDER (Aug. 10, 2018),
https://www.businessinsider.com/amazon-price-changes-2018-8 [https://perma.cc/V9B2-K9
WS].
57. Create a Pricing Rule, A
MAZON SELLER CTR., https://sellercentral.amazon.com/gp/
help/external/help.html?itemID=201995750&language=en_US&ref=efph_201995750_cont
_201994820 [https://perma.cc/A2X6-VTAK] (last visited Mar. 5, 2021).
58. David Z. Morris, What Causes Crazy-High Prices on Wayfair and Amazon?,
F
ORTUNE (July 14, 2020), https://fortune.com/2020/07/14/wayfair-cabinet-conspiracy-
algorithm-amazon-pricing-ecommerce/ [https://perma.cc/98X2-NRBF]. Though Amazon
does not require it, sellers can choose to set minimum or maximum thresholds. See also
supra note 57.
59. Manage SKUs in Business Pricing Rules Using Regional Automate Pricing File,
A
MAZON SELLER CTR., https://sellercentral.amazon.com/gp/help/external/help.html?itemID
=K6MARDVE75B2WXM&language=en_US&ref=efph_K6MARDVE75B2WXM_relt_20199
5750 [https://perma.cc/L9M7-CVVB] (last visited Mar. 5, 2021); see also supra note 57.
60. These structural elements of the Amazon Marketplace bear on the potential effect
to interstate commerce that would result from directly regulating Amazon for price gouging
violations. See infra Part II.B.
384 Columbia Journal of Law & Social Problems [55:3
location of the customer. This model allows for Amazon and third-
party sellers to quickly and easily increase prices during
emergencies, as was the case during the COVID-19 pandemic.
Significantly, Amazon’s practice of tailoring product prices based
on the customer’s location is relevant for enforcement of price
gouging laws because of the state-specific nature of those
regulations.
B. PRICE GOUGING ON AMAZON DURING THE COVID-19
PANDEMIC
News reports during the COVID-19 pandemic made clear that
price gouging flourished on online retail platforms, including and
especially on the Amazon Marketplace.
61
In response to
overwhelming reports of price gouging on the Marketplace,
Amazon proclaimed that the company had a “zero tolerance policy
for price gouging” and pointed to its existing Fair Pricing Policy as
an example of how the company is “working vigorously to combat
price gouging.”
62
Compared to the measures taken by other online retailers,
Amazon’s response was downright anemic. Online retailer eBay,
for example, blocked all posts of hand sanitizer or disinfectant
sales.
63
Amazon, by contrast, shifted the blame to its third-party
sellers who, as the company repeatedly emphasized, set their own
prices and provide more than half of the products available on the
61. See Selyukh, supra note 2 (reporting that thirty-three states’ attorneys general
penned an open letter to e-commerce sites in response to widespread price gouging on online
platforms).
62. Price Gouging Has No Place in Our Stores, A
MAZON (Mar. 23, 2020),
https://www.aboutamazon.com/news/company-news/price-gouging-has-no-place-in-our-
stores [https://perma.cc/93GY-M2S8].
63. See Bailey Miller & Steve Nielsen, Panic Buying Continues Amidst Coronavirus
Outbreak as Stores Impose Purchase Limits, F
OX 10 PHX., (Mar. 9, 2020),
https://www.fox10phoenix.com/news/panic-buying-continues-amidst-coronavirus-outbreak-
as-stores-impose-purchase-limits [https://perma.cc/5EYJ-MBMX]. Kroger limited the
number of cleaning products to five per order on its e-commerce site. See Jessica Guynn et
al., Coronavirus Fears Spark ‘Panic Buying’ of Toilet Paper, Water, Hand Sanitizer. Here’s
Why We All Need to Calm Down, USA
TODAY (Mar. 2, 2020), https://www.usatoday.com/
story/money/2020/03/02/coronavirus-toilet-paper-shortage-stores-selling-out/4930420002/
[https://perma.cc/V8Q5-KGZC]. Brick-and-mortar retailers acted even more quickly to
address scarcity of goods amid panic buying. Images of empty store shelves pervaded the
news and social media and many brick-and-mortar retailers, including Target, Costco, and
Walmart, imposed new limits on the quantity of certain items that could be purchased by
customers in a single visit. Id.
2022] Price Gouging and the Amazon Marketplace 385
Marketplace.
64
Although Amazon announced the suspension of
thousands of third-party sellers who violated the company’s
pricing policies, the response was reactive.
65
That is, Amazon
pursued an ineffective “whack a mole” approach that included
delisting price gouged items as they were brought to the company’s
attention and deflecting responsibility for the prices set by its
third-party sellers.
66
Amazon employed this reactive response
even though it was well-positioned to prevent the price gouging
with its existing pricing models and tools.
67
Despite Amazon’s rhetoric, however, third-party sellers were
not the sole culprit: the prices of Amazon-sold products also steeply
increased during the pandemic. A study by the consumer
protection group Public Citizen tracked prices on ten products
listed as “sold by Amazon” and likely to be deemed “essential”
under existing price gouging statutes.
68
The study found that
disposable face masks offered for sale by Amazon during the period
from April to August 2020 saw price increases of 1,000% as
compared to the pre-pandemic prices.
69
Amazon sold a disinfectant
spray product for over five years at $6.99, which was increased to
$13.04 as of March 19, 2020—an 87% increase in price.
70
Excessive
price gouging on the Amazon Marketplace was not, therefore,
limited to products sold by third-party sellers but rather extended
to Amazon-sold products as well.
Amazon profited from increased sales, including of price gouged
products, during the pandemic. In 2020, the company reported net
sales 38% higher than in the previous year—a whopping $105.6
64. See supra note 62.
65. See Brian Huseman, Opinion, How Amazon is Fighting Against Price Gouging
Amid Coronavirus Pandemic, T
ENNESSEAN (Apr. 20, 2020), https://www.tennessean.com/
story/opinion/2020/04/20/coronavirus-amazon-fighting-price-gouging/5168526002/
[https://perma.cc/P6DK-E2DQ] (guest column written by Amazon’s Vice President for Public
Policy).
66. This criticism was first levied at Amazon in a letter signed by thirty-three state
attorneys general to Jeff Bezos, founder and then-CEO of Amazon. See Lauren Feiner &
Scott Zamost, State AGs Call on Amazon, Facebook and Others to Crack Down on
Coronavirus Price Gouging, CNBC (Mar. 25, 2020), https://www.cnbc.com/2020/03/25/state-
ags-call-on-amazon-and-others-to-prevent-coronavirus-price-gouging.html
[https://perma.cc/JZA7-TL7U].
67. See discussion supra Part II.A. Amazon exerts a high level of control and
customization in pricing decisions, which highlights one simple truth—Amazon is in the
best position to prevent price gouging on Amazon.
68. See P
UBLIC CITIZEN, supra note 1, at 12.
69. Id.
70. Id. at 12, 14.
386 Columbia Journal of Law & Social Problems [55:3
billion increase to a total of $386.1 billion.
71
Amazon also benefited
from the widespread turn to e-commerce spurred by state and local
stay-at-home orders. In the two fiscal quarters preceding the
pandemic, Amazon’s online sales exhibited year over year growth
of 15% and 25%, respectively.
72
That growth skyrocketed to 49%
in the second quarter of 2020, fueled by the massive shift in
consumer behavior as a result of the pandemic.
73
Third-party
sellers played a role in Amazon’s growth, too. In the fourth quarter
of 2019 and the first quarter of 2020, Amazon’s sales from third-
party-seller services grew at a steady rate of 31%.
74
Amazon’s
sales from third-party-seller services grew at over 50% in each of
the second, third, and fourth quarters of 2020.
75
In short, the
pandemic delivered a windfall to Amazon while customers dealt
with egregious price gouging on essential household items.
C. ANTI-PRICE GOUGING ENFORCEMENT DURING THE COVID-19
PANDEMIC
In response to the widespread and exorbitant price increases on
the Amazon Marketplace during the pandemic, state attorneys
general released information on their price gouging enforcement
efforts. This data revealed not only the extent to which the number
of anti-price gouging enforcement actions varied state-to-state, but
also how even the most vigorous enforcement efforts fell woefully
short of the tsunami of consumer complaints.
76
From March to
May 2020, for example, the Michigan Attorney General received
over 4,200 complaints of price gouging, but ultimately pursued
enforcement actions against just eight third-party sellers, all of
71. Amazon.com Announces Financial Results and CEO Transition, AMAZON (Feb. 2,
2021), https://s2.q4cdn.com/299287126/files/doc_financials/2020/q4/Amazon-Q4-2020-Earn
ings-Release.pdf [https://perma.cc/4PE5-FCX3].
72. Id.
73. Id. The third and fourth quarter of 2020 saw year over year growth in online sales
of 37% and 43%, respectively.
74. Id. Third-party-seller services include commissions, and fulfillment and shipping
fees, among others. Id.
75. Id. (53%, 53%, and 54% in the second, third, and fourth quarters of 2020,
respectively).
76. K
ING & SPALDING, supra note 12; Michael Levenson, Price Gouging Complaints
Surge Amid Coronavirus Pandemic, N.Y.
TIMES (Mar. 27, 2020), https://www.nytimes.com/
2020/03/27/us/coronavirus-price-gouging-hand-sanitizer-masks-wipes.html
[https://perma.cc/MZ38-E95V].
2022] Price Gouging and the Amazon Marketplace 387
whom signed voluntary compliance forms.
77
During roughly that
same period, the Arkansas Attorney General’s Office received
2,025 complaints, 411 of which involved online sellers.
78
In
response to these complaints, the state issued just seventy-nine
warning letters to online sellers.
79
Illinois provides yet another
example: as of August 2020, the Illinois Attorney General had
received 1,800 complaints of price gouging, but had taken zero
enforcement actions.
80
Many states acknowledge receiving
hundreds or even thousands of price gouging complaints, but
pursuing no legal action.
81
In May 2020, the Online Merchants Guild, a trade association
for online sellers, filed suit against the Kentucky Attorney General
in the United States District Court for the Eastern District of
Kentucky, alleging that application of the state’s price gouging
laws to third-party sellers on the Amazon Marketplace violated the
dormant commerce clause.
82
The district court granted the Guild’s
motion for a preliminary injunction, concluding that the plaintiff
had a likelihood of succeeding on the merits of its dormant
commerce clause claim.
83
Government officials and consumer
advocacy groups decried the decision, which was vacated ten
months later by the Sixth Circuit in a narrow holding that did not
address the other dormant commerce clause arguments raised, but
77. See Nessel, supra note 35 (listing third-party sellers who signed Assurances of
Voluntary Compliance to resolve price gouging allegations).
78. See A
TT’Y GEN. LESLIE RUTLEDGE, ATTORNEY GENERAL’S COVID-19 ACTIVITY
REPORT: MARCH 11–JUNE 10, 2020, at 1, https://www.arkansasag.gov/site/assets/files/
90175/ag_covid-19_report.pdf [https://perma.cc/X2VH-A3LE].
79. Id.
80. John O’Connor, No Action from Pritzker’s COVID-19 Price Gouging Pursuit,
A
SSOCIATED PRESS (Aug. 31, 2020), https://apnews.com/article/f0c224e25e352647c987d2db
d1806f4d [https://perma.cc/Z458-QY4M].
81. For example, in testimony before the state legislature, the Connecticut Attorney
General said investigators responded to 750 complaints of price gouging in 2020, but were
unable to bring a single enforcement action. Hearing on H. B. 5307: An Act Concerning
Price Gouging, 2021 Leg. Sess. (Ct. 2021) (statement of William Tong, Attorney General,
Connecticut), https://portal.ct.gov/-/media/AG/Press_Releases/2019/Price-Gougin g-
Testimony-HB-5307.pdf [https://perma.cc/WYH8-VQV4]. The Maine Attorney General
received 83 complaints of price gouging as of April 2020; the few complaints that “appeared
to have merit” were resolved by voluntary compliance agreements. See Randy Billings,
Maine Attorney General Fielding Dozens of Price-Gouging Complaints During Crisis,
P
ORTLAND PRESS HERALD (Apr. 2, 2020), https://www.pressherald.com/2020/04/02/maine-
ag-receives-dozens-of-price-gouging-complaints/ [https://perma.cc/LWY3-PQ5X].
82. Online Merchs. Guild v. Cameron, 468 F. Supp. 3d 883, 889 (E.D. Ky. 2020),
vacated, 995 F.3d 540 (6th Cir. 2021).
83. Id. at 902–03.
388 Columbia Journal of Law & Social Problems [55:3
not fully briefed, before the district court.
84
The narrowness of the
Sixth Circuit decision, combined with the incoherence of the
dormant commerce clause doctrine, has raised questions as to
whether other federal courts will uphold similar dormant
commerce clause challenges to state regulations of online price
gouging.
85
Nevertheless, as the next Part will show, reports of the
death of regulating online price gouging have been greatly
exaggerated.
III. THE DORMANT COMMERCE CLAUSE
This Part describes the dormant commerce clause doctrine and
evaluates the extent to which the doctrine is implicated by the
application of state price gouging laws to online sellers.
Article I of the U.S. Constitution grants Congress the power
“[t]o regulate Commerce . . . among the several States.”
86
The
Supreme Court has long held that the Commerce Clause’s
affirmative grant of power to Congress impliedly constrains state
power over interstate commerce.
87
A judicially-created doctrine,
the so-called “dormant” commerce clause embodies the “central
concern of the Framers . . . that in order to succeed, the new Union
would have to avoid the tendencies toward economic
Balkanization.”
88
Consistent with this principle, the dormant
commerce clause forbids state regulations that discriminate
against or excessively burden interstate commerce.
89
The Supreme Court has articulated a two-tiered approach to
analyzing state regulations under the dormant commerce clause.
90
84. Online Merchs. Guild v. Cameron, 995 F.3d 540 (6th Cir. 2021).
85. See e.g., Stephen L. Carter, Price-Gouging Laws Create a Headache for Amazon,
B
LOOMBERG (May 19, 2021), https://www.bloomberg.com/opinion/articles/2021-05-19/price-
gouging-laws-create-a-headache-for-amazon [https://perma.cc/M53M-RNLY] (“Still, not
every federal court would reach the result the 6th Circuit. . . . At some [point] either the
U.S. Supreme Court or the Congress will have to settle the matter.”).
86. U.S.
CONST. art. I, § 8, cl. 3.
87. The doctrine traces back to Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) and
Cooley v. Board of Wardens, 53 U.S. (12 How.) 299 (1851).
88. Hughes v. Oklahoma, 441 U.S. 322, 325 (1979). More broadly, the dormant
commerce clause doctrine reflects principles of horizontal federalism. See South Dakota v.
Wayfair, Inc., 138 S. Ct. 2080, 2090 (2018) (“[T]he doctrine . . . accommodate[s] the
necessary balance between state and federal power.”).
89. Abutting the two tiers of review is the principle against extraterritoriality. See
infra Part III.B.
90. See Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 578–
79 (1986) (“This Court has adopted what amounts to a two-tiered approach to analyzing
state economic regulation under the Commerce Clause.”).
2022] Price Gouging and the Amazon Marketplace 389
Under the first tier, state laws that discriminate against interstate
commerce are “virtually per se invalid.”
91
Under the second tier,
state laws that “regulate[ ] even-handedly to effectuate a
legitimate local public interest” with “only incidental” effects on
interstate commerce are reviewed under the deferential balancing
standard announced in Pike v. Bruce Church, Inc., and are upheld
if the burden to interstate commerce is not “clearly excessive in
relation to the putative local benefits.”
92
These two tiers comprise
the core of the dormant commerce clause doctrine.
93
The elegance of the two-tiered framework belies the murkiness
of the doctrine; this Part seeks to provide clarity. Part III.A
discusses the development and application of the two-tiered
approach. Part III.B explores the complicating factor of the
extraterritoriality principle and its prominence in lower federal
court decisions invalidating state regulation of internet activity.
A. THE TWO-TIERED APPROACH TO ANALYZING STATE LAWS
UNDER THE DORMANT COMMERCE CLAUSE
1. The First Tier: State Laws that Discriminate Against Interstate
Commerce
Under the first tier, state laws that discriminate against
interstate commerce are subject to a “virtually per se rule of
invalidity.”
94
Discrimination can appear on the face of the state
law. The axiomatic facially discriminatory state law “overtly
blocks the flow of interstate commerce at [the] border;” an example
is the New Jersey law prohibiting the importation of waste
91. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 575 (1997)
(quoting Fulton Corp. v. Faulkner, 516 U.S. 325, 331 (1996)).
92. 397 U.S. 137, 142 (1970).
93. See generally Brannon P. Denning, Reconstructing the Dormant Commerce Clause
Doctrine, 50 W
M. & MARY L. REV. 417, 418–23 (2008) (tracing the development of the two
tiers of review). The Supreme Court’s most recent explanation of the dormant commerce
clause doctrine did not use the word “tiers,” but described “two principles [that] guide the
courts in adjudicating cases challenging state laws under the Commerce Clause.” Wayfair,
138 S. Ct. at 2091.
94. Oregon Waste Sys., Inc. v. Dep’t of Env’t Quality of Or., 511 U.S. 93, 100 (1994).
Discriminatory laws may still be upheld if the state shows that it “has no other means to
advance a legitimate local purpose.” United Haulers Ass’n v. Oneida-Herkimer Solid Waste
Mgmt. Auth., 550 U.S. 330, 338–39 (2007). In practice, though, the Court has only once
upheld a discriminatory state law. See Maine v. Taylor, 477 U.S. 131, 143 (1986) (declining
to invalidate a state import ban where the record showed “less discriminatory means . . .
[were] unavailable”).
390 Columbia Journal of Law & Social Problems [55:3
collected out of state, which the Court struck down as
unconstitutionally discriminatory in City of Philadelphia v. New
Jersey.
95
Facial discrimination can also mean merely “differential
treatment of in-state and out-of-state economic interests that
benefits the former and burdens the latter.”
96
For example, in
Camps Newfound/Owatonna, Inc. v. Town of Harrison, the Court
invalidated as discriminatory a Maine tax exemption available to
in-state summer camps serving predominately in-state campers,
but unavailable to in-state summer camps serving predominately
out-of-state campers.
97
A state law that is neutral on its face may nonetheless
constitute impermissible discrimination in its practical effect.
98
The leading case on facially neutral discrimination is Hunt v.
Washington State Apple Advertising Commission.
99
In Hunt, the
Court invalidated North Carolina’s mandate that all containers of
apples sold in the state bear either a U.S. Department of
Agriculture (USDA) stamped grade or no grade at all.
100
The Court
held that the law, though facially neutral, nonetheless
discriminated against interstate commerce in its practical effect
because in-state apple producers already used USDA stamped
grades, whereas most out-of-state producers used state-specific
grades; accordingly, the Court concluded that the law imposed
significant costs on out-of-state producers to the advantage of in-
state producers.
101
The Court distinguished Hunt one year later in Exxon Corp. v.
Governor of Maryland to uphold a Maryland law prohibiting oil
producers from operating retail gas stations in the state—a
prohibition that affected only out-of-state oil producers because
there were no oil producers located in Maryland.
102
The Court
explained that “since there are no local producers or refiners, such
95. 437 U.S. 617, 624 (1978).
96. United Haulers Ass’n, 550 U.S. at 338–39.
97. 520 U.S. 564, 576 (1997).
98. See C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 394–95 (1994); Hughes v.
Oklahoma, 441 U.S. 322, 336 (1979).
99. 432 U.S. 333 (1977).
100. Id. at 337.
101. Id. at 351–52. The Court seemed skeptical about the non-protectionist motives for
the law offered by North Carolina, but ultimately determined that “we need not ascribe an
economic protection motive to the North Carolina Legislature to resolve this case” because
the law was unconstitutionally discriminatory “even if enacted for the declared purpose of
protecting consumers from deception and fraud in the marketplace.” Id. at 352–53.
102. 437 U.S. 117 (1978).
2022] Price Gouging and the Amazon Marketplace 391
claims of disparate treatment between interstate and local
commerce would be meritless.”
103
Taken together, Hunt and Exxon
stand for the principle that the first tier’s “virtually per se rule of
invalidity” does not apply to a facially neutral law affecting solely
out-of-state economic entities, as long as there are no similarly
situated in-state entities that stand to benefit from the
regulation.
104
2. The Second Tier: State Laws with “Only Incidental” Effects on
Interstate Commerce
The second tier of state laws are those that “regulate[ ] even-
handedly to effectuate a legitimate local public interest.”
105
These
laws face the deferential Pike balancing standard and “will be
upheld unless the burden imposed on such commerce is clearly
excessive in relation to the putative local benefits.”
106
State laws
in the second tier almost always survive judicial review: the Court
has not invalidated a state law under Pike in over thirty-five
years.
107
Moreover, when the Court does apply Pike balancing, its actual
analysis of benefits and burdens is often cursory. Consider United
Haulers Association, Inc. v. Oneida-Herkimer Solid Waste
Management Authority, where the Court upheld county ordinances
requiring waste haulers to use a publicly owned disposal and
processing facility.
108
In a perfunctory application of the Pike
balancing standard, the Court deemed it “unnecessary to decide
103. Id. at 125.
104. Circuit courts have relied on Exxon to hold that the “virtually per se rule of
invalidity” does not apply to a state law prohibiting automakers from operating in-state
retail dealerships and a state law banning contact lens manufacturers from setting
minimum prices on in-state retail sales, where there were no automakers or contact lens
manufacturers in the regulating state that would benefit from the laws. See Johnson &
Johnson Vision Care, Inc. v. Reyes, 665 F. App’x 736 (10th Cir. 2016) (upholding Utah law
prohibiting contact lens manufacturers from setting minimum prices for in-state retail
sales); Ford Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493 (5th Cir. 2001) (upholding
Texas law preventing car manufacturers from engaging in retail sales in the state).
105. Pike v. Bruce Church, Inc., 397 U. S. 137, 142 (1970).
106. Id.
107. See Daniel Francis, The Decline of the Dormant Commerce Clause, 94 D
ENV. L. REV.
255, 301 (2017) (identifying CTS Corps. v. Dynamics Corp of America as the last decision
where the Court used the undue burden balancing approach to invalidate a state law).
108. 550 U.S. 330, 346 (2007). The Court first engaged in the threshold determination
of the appropriate tier of review, concluding that the ordinance was not discriminatory
because the in-state entity advantaged by the ordinance was publicly owned. Id. at 342–
46.
392 Columbia Journal of Law & Social Problems [55:3
whether the ordinances impose any incidental burden on
interstate commerce” in light of the ordinances’ public benefits—
namely, revenue generation and increased recycling—and
concluded that the ordinances passed constitutional muster under
the Pike test.
109
The analytical superficiality characterizing
judicial application of Pike has provoked extensive criticism from
scholars and judges alike.
110
Pike balancing is also regularly
criticized on the grounds of institutional competence: critics
contend that weighing the benefits and burdens of state
regulations is an inquiry “ill-suited to the judicial function.”
111
Despite the sustained criticism, the Pike balancing standard
has been referenced by the lower courts and the Supreme Court in
almost every dormant commerce clause case in the past fifty
years.
112
In fact, in its most recent dormant commerce clause
decision, the Supreme Court remanded with the instruction—
citing Pike—to apply the two-tiered standard of review.
113
The
Court’s recent validation of the Pike standard, combined with the
unwavering commitment to Pike at the lower federal level,
109. Id. at 346–47 (“The ordinances give the Counties a convenient and effective way to
finance their integrated package of waste-disposal services . . . [and] increase recycling in
at least two ways. . . . For these reasons, any arguable burden the ordinances impose on
interstate commerce does not exceed their public benefits.”).
110. See, e.g., T. Alexander Aleinikoff, Constitutional Law in the Age of Balancing, 96
Y
ALE L.J. 943, 976–82 (1987) (arguing that Supreme Court decisions applying Pike reveal
that the balancing analysis is “rudimentary” and “takes place inside a black box,” which
“severely damage[s] the credibility of the methodology”); Donald H. Regan, Siamese Essays:
(I) CTS Corp. v. Dynamics Corp. of America and Dormant Commerce Clause Doctrine; (II)
Extraterritorial State Legislation, 85 M
ICH. L. REV. 1865, 1866–67 (1987) (“[T]he Pike test
is a red herring. It was not applied even in Pike itself.”).
111. CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 95 (1987) (Scalia, J., concurring).
A vociferous critic of the Pike balancing standard, Justice Scalia has observed that while
the Pike analysis is “ordinarily called ‘balancing’ . . . [i]t is more like judging whether a
particular line is longer than a particular rock is heavy.” Bendix Autolite Corp. v. Midwesco
Enter., Inc., 486 U.S. 888, 897 (1988) (Scalia, J., concurring). Justice Thomas, another foe
of Pike, has criticized it for “invit[ing] us, if not compel[ling] us, to function more as
legislators than as judges.” Camps Newfound/Owatonna, Inc., 520 U.S. at 619 (Thomas, J.,
dissenting).
112. The Supreme Court has actually used the Pike balancing standard to strike down
a state law in only a handful of cases. See Bendix Autolite Corp., 486 U.S. at 888; Kassel v.
Consol. Freightways Corp. of Del., 450 U.S. 662 (1981). The lower federal courts, however,
regularly apply the Pike balancing standard. See, e.g., Rosenblatt v. City of Santa Monica,
940 F.3d 439, 452 (9th Cir. 2019) (applying Pike); VIZIO, Inc. v. Klee, 886 F.3d 249, 260 (2d
Cir. 2018) (applying Pike); Greater L.A. Agency on Deafness, Inc. v. Cable News Network,
Inc., 742 F.3d 414, 433 (9th Cir. 2014) (applying Pike); N. Am. Meat Inst. v. Becerra, 420 F.
Supp. 3d 1014 (C.D. Cal. 2019) (applying Pike), aff’d, 825 F. App’x 518 (9th Cir. 2020).
113. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2091 (2018).
2022] Price Gouging and the Amazon Marketplace 393
cements the Pike balancing standard as core to the dormant
commerce clause doctrine.
While courts and academics broadly agree that the dormant
commerce clause doctrine comprises the two tiers described above,
there is substantial disagreement as to whether the doctrine also
involves a third tier of analysis for state laws that regulate
extraterritorially.
114
B. THE EXTRATERRITORIALITY PRINCIPLE IN DORMANT
COMMERCE CLAUSE JURISPRUDENCE
Extraterritoriality emerged as a robust, analytically
independent branch of the dormant commerce clause doctrine in a
series of Supreme Court decisions in the 1980s, but fell out of favor
shortly thereafter.
115
The principle was revived again by the lower
courts in cases involving state internet regulation. As this Part
will explain, however, extraterritoriality analysis of state internet
regulation is often flawed.
1. The Rise and Fall of the Extraterritoriality Principle
The extraterritoriality principle is an area in which “a page of
history is worth a volume of logic.”
116
Extraterritoriality as a
component of the dormant commerce clause analysis first emerged
in Baldwin v. GAF Seelig, Inc., where the Court struck down a New
York law that prohibited out-of-state milk producers from selling
milk in New York at a price below the minimum price for milk
produced in the state.
117
Writing for a unanimous Court, Justice
Cardozo coined the phrase that became indelible to the dormant
commerce clause doctrine’s bar on so-called extraterritorial
regulation: “New York has no power to project its legislation into
Vermont by regulating the price to be paid in that state for milk
acquired there.”
118
114. Compare Susan Lorde Martin, The Extraterritoriality Doctrine of the Dormant
Commerce Clause is Not Dead, 100 M
ARQ. L. REV. 497, 497 (2016) (asserting that the
extraterritoriality principle still serves analytically distinct and important purposes in the
dormant commerce clause doctrine), with Brannon P. Denning, Extraterritoriality and the
Dormant Commerce Clause: A Doctrinal Post-Mortem, 73 L
A. L. REV. 979, 980 (2013)
(characterizing the extraterritoriality principle as “dead and unlikely to be revived”).
115. See infra notes 116–130 and accompanying text.
116. New York Tr. Co. v. Eisner, 256 U.S. 345, 349 (1921).
117. 294 U.S. 511, 521 (1935).
118. Id. (emphasis added).
394 Columbia Journal of Law & Social Problems [55:3
A half-decade later, the Court built on Baldwin to articulate an
expansive conception of the extraterritoriality principle.
119
In
Brown-Forman Distillers Corp. v. N.Y. State Liquor Authority and
Healy v. Beer Institute, the Court used the extraterritoriality
principle to invalidate so-called “price affirmation” statutes that
required out-of-state alcohol shippers to “affirm” that the prices
they charged in-state wholesalers were no higher than their prices
charged to wholesalers in other states.
120
The Healy Court
explained that, when determining if a state law violates the
principle against extraterritoriality, “[t]he critical inquiry is
whether the practical effect of the regulation is to control conduct
beyond the boundaries of the State.”
121
This formulation of the
extraterritoriality principle is markedly more expansive than was
articulated in Baldwin, the foundational decision on
extraterritoriality.
122
Legal scholars have roundly criticized
Healy’s conception of extraterritoriality as “clearly too broad” and
“inconsistent with federalism values.”
123
Developments in the
dormant commerce clause jurisprudence after Healy suggest
members of the Court may agree; today, Healy’s sweeping
articulation of extraterritoriality is an outlier in the Court’s case
law and has been significantly hemmed in, if not completely
repudiated, by the Court in the twenty-first century.
124
Despite the potency of extraterritoriality in the 1980s, the
Court did not again invoke the principle in a dormant commerce
clause case for over a decade, until Pharmaceutical Research and
119. See Healy v. Beer Inst., 491 U.S. 324 (1989); Brown-Forman Distillers Corp. v. N.Y.
State Liquor Auth., 476 U.S. 573 (1986); Edgar v. MITE Corp., 457 U.S. 624 (1982).
120. Brown-Forman, 476 U.S. at 579; Healy, 491 U.S. at 327–28.
121. Healy, 491 U.S. at 336 (emphasis added). The Court also indicated that analyzing
a state law under the dormant commerce clause may require considering the law’s
“interact[ions] with the legitimate regulatory regimes of other States and what effect would
arise if not one, but many or every, State adopted similar legislation.” Id. See also infra
notes 151–155 and accompanying text.
122. Indeed, the concurring and dissenting opinions in Healy noted as much. Healy, 491
U.S. at 344–45 (Scalia, J., concurring in part and dissenting in part) (declining to endorse
the majority’s “more expansive” extraterritoriality analysis); id. at 345–49 (Rehnquist, C.J.,
dissenting) (characterizing the majority’s application of Baldwin as “wrong . . . both as a
matter of economics and as a matter of law” and further emphasizing that the challenged
Connecticut law “is markedly different from the New York statute condemned in Baldwin”).
123. Darien Shanske, Proportionality as Hidden (But Emerging?) Touchstone of
American Federalism: Reflections on the Wayfair Decision, 22 C
HAP. L. REV. 73, 80 (2019);
Denning, supra note 114, at 980; Jack L. Goldsmith & Alan O. Sykes, The Internet and the
Dormant Commerce Clause, 110 Y
ALE L.J. 785, 790 (2001).
124. See infra notes 125–134 and accompanying discussion.
2022] Price Gouging and the Amazon Marketplace 395
Manufacturers of America v. Walsh.
125
If Healy marked the zenith
of the extraterritoriality principle’s development, then Walsh, the
“leading non-application” of the principle, may well be considered
its nadir.
126
In Walsh, the challenged Maine law required
pharmaceutical manufacturers that sold drugs through Maine’s
Medicaid program to enter into rebate agreements with the state
or face prior authorization requirements on those sales.
127
Out-of-
state drug manufacturers challenged the Maine law, claiming that
the rebate agreements amounted to unconstitutional
extraterritorial regulation.
128
Rejecting this argument without
elaborate discussion, the Court explained that the Maine law “[is]
unlike price control or price affirmation statutes . . . [and] the rule
that was applied in Baldwin and Healy accordingly is not
applicable.”
129
The Court thus narrowed the scope of its
extraterritoriality precedents and arguably limited the application
of the principle to price control and price affirmation statutes.
Indeed, some scholars and courts have interpreted Walsh as
marking, if not the end of extraterritoriality, then at least a
substantial cabining of the principle.
130
Further evidence of the Court’s retreat from extraterritoriality
is found in the recent case of South Dakota v. Wayfair, Inc., which
concerned the constitutionality of a South Dakota law requiring
out-of-state sellers to collect sales taxes on in-state sales made over
the internet “as if the seller had a physical presence in the
State.”
131
The Court revisited, and ultimately overturned, its
earlier precedent that a state can require an out-of-state seller to
collect the state tax only if the seller actually has a physical
125. 538 U.S. 644 (2003).
126. Shanske, supra note 123, at 80 (describing Walsh as “the leading non-application”
of the extraterritoriality principle).
127. Walsh, 538 U.S. at 654.
128. Id. at 669.
129. Id. at 670.
130. See, e.g., Denning, supra note 114, at 1006 (“[E]xtraterritoriality is, for all intents
and purposes, dead.”); Shanske, supra note 123, at 80 (“[T]he Supreme Court . . . [has]
allow[ed] the doctrine to become most dormant.”); Energy & Env’t Legal Inst. v. Epel, 793
F.3d 1169, 1172 (10th Cir. 2015) (“[The] extraterritoriality principle may be the least
understood of the Court’s three strands of dormant commerce clause jurisprudence. It is
certainly the most dormant. . . . [The Supreme Court] has used [the] extraterritoriality
principle to strike down state laws only three times.”); Rocky Mountain Farmers Union v.
Corey, 730 F.3d 1070, 1101 (9th Cir. 2013) (“In the modern era, the Supreme Court has
rarely held that statutes violate the extraterritoriality doctrine.”).
131. 138 S. Ct. 2080, 2089 (2018).
396 Columbia Journal of Law & Social Problems [55:3
presence in the state.
132
The extraterritoriality principle—
emphasized by amici in a brief supporting the respondents—is
notably absent from the Wayfair opinion.
133
The Court’s decision
to remand the case to the lower court for consideration under the
second tier’s balancing standard may suggest that, insofar as the
extraterritoriality principle exists today in the dormant commerce
clause doctrine, it is properly understood as incorporated in the
dominant two-tiered framework and not as a separate, analytically
independent branch of the doctrine.
134
Wayfair also suggests that the Court construes the dormant
commerce clause as amenable to state regulation of at least some
internet activity. Thus, the absence of the extraterritoriality
principle in the Wayfair opinion may be significant for the
constitutionality of state internet regulation because, as the next
Part will explore, lower courts have invalidated numerous state
internet regulations as impermissible extraterritorial regulation.
2. The Extraterritoriality Principle and State Regulation of
Internet Activity
The Wayfair Court’s silence as to extraterritoriality may
represent a coda to a thread of lower federal court decisions
striking down state internet regulations as violative of the
extraterritoriality principle.
135
Judicial invalidation of state
132. The Court explained that the physical presence rule “creates rather than resolves
market distortions” and “imposes the sort of arbitrary, formalistic distinction that the
Court’s modern Commerce Clause precedents disavow.” Wayfair, 138 S. Ct. at 2092. The
physical presence rule was first announced in Quill Corp. v. North Dakota, 504 U.S. 298,
112 (1992).
133. See Brief for Nat’l Taxpayers Union Found. et al. as Amici Curiae Supporting
Respondents, South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) (No. 17-494), 2018 WL
1709085, at *6. The opinion’s omission of extraterritoriality is especially notable because
the amici were echoing extraterritoriality arguments made by then-attorney-now-Chief-
Justice John Roberts some fifteen years earlier, in an amicus brief in Walsh. See Brief for
Chamber of Commerce of the United States as Amicus Curiae Supporting Petitioner,
Pharm. Rsch. & Mfrs. of Am. v. Walsh, 538 U.S. 644 (2003) (No. 01-188), 2002 WL 31120077,
at *15.
134. Wayfair, 138 S. Ct. at 2099.
135. See, e.g., Online Merchs. Guild v. Cameron, 468 F. Supp. 3d 883, 901 (E.D. Ky.
2020), vacated, 995 F.3d 540 (6th Cir. 2021); Am. Booksellers Ass’n v. Dean, 342 F.3d 96 (2d
Cir. 2003); ACLU v. Johnson, 194 F.3d 1149 (10th Cir. 1999); Am. Libraries Ass’n v. Pataki,
969 F. Supp. 160 (S.D.N.Y. 1997). Although Wayfair may suggest that the Court is loath to
construct the dormant commerce clause as a vehicle to invalidate state internet regulations,
this conclusion would be too sanguine if not qualified in two important respects. First, the
Court sharply divided in Wayfair. Chief Justice Roberts’ dissenting opinion, joined by
Justices Breyer, Sotomayor, and Kagan, agreed that the physical presence rule was wrongly
2022] Price Gouging and the Amazon Marketplace 397
internet regulations under the extraterritoriality principle began
with American Libraries Association v. Pataki, where a federal
district court held that a New York law criminalizing the use of the
internet to send explicit content to minors violated the dormant
commerce clause.
136
The Pataki court began with the empirical
assumption that “no aspect of the Internet can feasibly be closed
off to users from another state,” and relied on this assumption to
hold that New York had impermissibly regulated extraterritorially
because it “deliberately imposed its legislation on the Internet and,
by so doing, projected its law into other states whose citizens use
the Net.”
137
This reasoning—that state regulation of the internet
may, due to the very nature of the internet, invariably amount to
unconstitutional extraterritorial regulation—has had a profound
and lasting influence.
138
Numerous federal courts have followed
the Pataki court’s reasoning to invalidate state internet
regulations as violating the principle against extraterritoriality.
139
In an influential article published in the Yale Law Journal,
Professors Jack Goldsmith and Alan Sykes persuasively
challenged the Pataki court’s understanding of the extraterritorial
implications of state internet regulation.
140
Goldsmith and Sykes
argued that the Pataki analysis “rests on an impoverished
understanding of the architecture of the Internet . . . misreads
decided but argued that any change to that rule should be undertaken by Congress, not by
the Court. Id. at 2103. Second, the composition of the Court has changed in the three years
since Wayfair. The seats once held by Justice Kennedy, who wrote the majority opinion,
and Justice Ginsburg, who joined that opinion, are now occupied by Justices Kavanaugh
and Barrett. It remains an open question whether they share Justice Scalia’s—and Justice
Thomas’—hostility toward the dormant commerce clause. See supra note 111. Ultimately,
and even with these two qualifications, Wayfair indicates that there is at least some appetite
to treat the dormant commerce clause as amenable to state regulation of internet activity.
136. 969 F. Supp. 160, 169 (S.D.N.Y. 1997).
137. Id. at 171; id. at 177.
138. See Goldsmith & Sykes, supra note 123, at 787 (noting that extraterritoriality was
popularly referred to as a “nuclear bomb of a legal theory” against state internet regulation);
Note, Kenneth D. Bassinger, Dormant Commerce Clause Limits on State Regulation of the
Internet: The Transportation Analogy, 32 G
A. L. REV. 889, 905–25 (1998).
139. See Goldsmith & Sykes, supra note 123, at 792 (collecting cases); see also PSINet,
Inc. v. Chapman, 362 F.3d 227, 239–40 (4th Cir. 2004) (adopting the rationale of Pataki to
invalidate Virginia law criminalizing use of internet to send harmful content to minors);
ACLU v. Johnson, 194 F.3d 1149, 1161 (10th Cir. 1999) (affirming district court decision
that “largely relied” on the Pataki analysis to strike down a New Mexico prohibition on
sending harmful content to minors over the internet); Cyberspace Commc’ns, Inc. v. Engler,
55 F. Supp. 2d 737, 741 (E.D. Mich. 1999) (relying extensively on Pataki factual findings
with respect to “the Nature of the Internet” and dormant commerce clause analysis to
invalidate a Michigan law criminalizing explicit internet communications with minors).
140. See Goldsmith & Sykes, supra note 123.
398 Columbia Journal of Law & Social Problems [55:3
dormant Commerce Clause jurisprudence, and . . .
misunderstands the economics of state regulation of transborder
transactions.”
141
Rejecting the Pataki court’s assertion that the
internet raises unique extraterritorial concerns, Goldsmith and
Sykes concluded that a state regulation requires the same
treatment under the dormant commerce clause in the internet
context as in the non-internet context.
142
Goldsmith and Sykes’ argument, combined with the Court’s
apparent indifference to extraterritoriality in Wayfair, suggests
that the appropriate dormant commerce clause analysis of a state
internet regulation requires nothing more than evaluating the
burden of the regulated internet activity on interstate commerce,
as with any other state regulation.
143
With this framework in mind, state internet regulation of the
sale of tangible goods and services are less likely to violate the
dormant commerce clause than regulation of purely digital or
online activity.
144
This is because an out-of-state provider of a real-
world good knows the physical location of the buyer.
145
Consider
two cases from the Second Circuit where the out-of-state party’s
knowledge of the physical location of the in-state party was
decisive. In American Booksellers Association v. Dean, the Second
Circuit enjoined a Vermont law, similar to the law invalidated in
Pataki, that prohibited using the internet to send explicit content
to minors.
146
The Second Circuit held that the law violated the
dormant commerce clause’s extraterritoriality principle because
“[a] person outside Vermont who posts information on a website or
on an electronic discussion group cannot prevent people in
Vermont from accessing the material.”
147
Four years later, in
141. Id. at 787.
142. Id. at 798.
143. The Wayfair Court suggested in dicta a willingness to adjust its dormant commerce
clause doctrine to accommodate technological advancements in the modern economy. The
Court condemned as arbitrary and artificial the physical presence requirement, noting that
the “dramatic technological and social changes of our increasingly interconnected economy
mean that buyers are closer to most major retailers than ever before—regardless of how
close or far the nearest storefront.” Wayfair, 138 S. Ct. at 2095 (internal citation omitted).
The Court further observed that “[b]etween targeted advertising and instant access to most
consumers via any internet-enabled device, a business may be present in a State in a
meaningful way without that presence being physical in the traditional sense of the term.”
Id.
144. See Goldsmith & Sykes, supra note 123, at 824.
145. Id.
146. 342 F.3d 96 (2d Cir. 2003).
147. Id. at 103.
2022] Price Gouging and the Amazon Marketplace 399
SPGGC, L.L.C. v. Blumenthal, the Second Circuit distinguished
Dean and upheld a Connecticut law regulating the sale of gift cards
in the state, including sales made over the internet by out-of-state
sellers.
148
The court first explained that the law in Dean had
constituted impermissible extraterritorial regulation “[b]ecause a
person outside Vermont could not effectively prevent persons
inside Vermont from accessing material posted on a website [and
therefore] out-of-state publishers were forced to comply with the
Vermont statute or risk prosecution.”
149
The SPGGC court then
held that Connecticut’s law did not regulate extraterritorially
because “[there is] readily available a near-perfect means of
distinguishing between online consumers . . . who reside in
Connecticut and those who reside elsewhere—their credit card
billing addresses.”
150
Taken together, Dean and SPGGC indicate
that state regulation of an internet transaction is less likely to
offend the dormant commerce clause when the regulated
transaction has a nexus to real-world goods and services such that
there is a readily available means of identifying the geolocation of
the receiving party.
Moreover, knowledge of the receiving party’s physical location
reduces the risk that an online transaction will be subject to
inconsistent state regulations—that is, that a single transaction
will be regulated by multiple states. Inconsistent state regulations
often imply extraterritoriality concerns.
151
The dormant commerce
clause’s protection against inconsistent regulations can be traced
to the Supreme Court’s decision in CTS Corp. v. Dynamics Corp. of
America.
152
Upholding the challenged Indiana law regulating the
tender offers of corporations chartered in Indiana, the CTS Corp.
Court concluded that there was no risk that corporations’ tender
offers would face inconsistent state regulations: “[s]o long as each
State regulates voting rights only in the corporations it has
created, each corporation will be subject to the law of only one
State.”
153
In the context of internet regulations, then, an online
seller of real-world goods will not be subject to inconsistent
regulations for an individual transaction when the receiving
148. 505 F.3d 183 (2d Cir. 2007).
149. Id. at 195 (citation omitted).
150. Id.
151. See Regan, supra note 110, at 1880–85.
152. 481 U.S. 69, 88 (1987).
153. Id. at 89.
400 Columbia Journal of Law & Social Problems [55:3
party’s real-world location is readily ascertainable.
154
State
regulation of one-on-one commercial transactions on the internet
thus does not raise concerns of inconsistent regulations, in sharp
contrast to state regulation of “websites, bulletin-board services,
and chat rooms, which can be accessed by virtually anyone,
anywhere, without control by the one posting the information.”
155
Geolocation techniques therefore militate against a dormant
commerce clause violation by reducing the risk that a transaction
will be subject to inconsistent state regulations.
At bottom, a state internet regulation is evaluated under the
dormant commerce clause according to the same analytical
framework that governs a non-internet regulation.
156
That
analytical framework, as has been explained, considers a state law
in one of two tiers.
157
Analysis of the extraterritorial effects of a
law, moreover, is integrated into the two-tiered framework, even
when the regulated activity takes place on the internet.
158
IV. ENFORCING PRICE GOUGING REGULATIONS ON THE
AMAZON MARKETPLACE
As Part III has explained, state internet regulations do not
raise unique extraterritoriality concerns, nor do they necessarily
create an elevated likelihood of violating the dormant commerce
clause. This Part examines the intersection of the dormant
commerce clause and state price gouging laws. Part IV.A
evaluates recent decisions applying the dormant commerce clause
to a state’s price gouging law. Part IV.B applies the dormant
commerce clause to state regulation of price gouging on the
Amazon Marketplace with a focus on two possible enforcement
targets—third-party sellers and Amazon itself—to conclude that
the dormant commerce clause is likely not violated by either
application. Part IV.C then offers proposals for statutory reforms
154. See Goldsmith & Sykes, supra note 123, at 802–10.
155. Quik Payday, Inc. v. Stork, 549 F.3d 1302 (10th Cir. 2008). In that case, the Tenth
Circuit held that the Kansas law regulating payday loans issued over the internet did not
regulate extraterritorially, distinguishing it from the New Mexico law prohibiting certain
explicit online content that the court had invalided nine years earlier: “Regulation of one-
to-one commercial exchanges via the Internet . . . is quite a different matter. The potential
for multiple jurisdictions to regulate the same transaction is much more limited.” Id. at
1312.
156. See supra notes 140–143 and accompanying text.
157. See supra notes 94–113 and accompanying text.
158. See supra notes 140–143 and accompanying text.
2022] Price Gouging and the Amazon Marketplace 401
designed to strengthen the likelihood that a state regulation of
price gouging on the Amazon Marketplace will survive a
constitutional challenge under the dormant commerce clause.
A. CASE LAW CONCERNING PRICE GOUGING ON AMAZON
Before applying the dormant commerce clause to state price
gouging regulations, an examination of on-point, if limited, case
law is in order. In Online Merchants Guild v. Cameron, a federal
district court enjoined the state of Kentucky from applying the
state’s price gouging laws to Kentucky-based third-party sellers on
Amazon, on the grounds that such an application amounts to
extraterritorial regulation in violation of the dormant commerce
clause.
159
Crucial to the reasoning in Online Merchants Guild is
the structure of the Amazon Marketplace vis-à-vis third-party
sellers.
160
Specifically, third-party sellers cannot set state-specific
prices, but instead must set a single price for consumers
nationwide.
161
Consequently, the court reasoned, when third-
party sellers seek to comply with Kentucky’s price gouging
regulation, the Kentucky-compliant price operates as a “national
ceiling.”
162
The court concluded that the Kentucky law regulated
extraterritorially by “effectively dictat[ing] the price of items for
sale on Amazon nationwide.”
163
On appeal, the Sixth Circuit held that the district court erred
in its application of extraterritoriality.
164
The court explained that
any extraterritorial regulation caused by the law’s application to
the Amazon Marketplace “is entirely dependent upon Amazon’s
independent decisionmaking with regard to the structure of its
online marketplace,” such that the law’s application to sales made
by Kentucky-based third-party sellers on Amazon to Kentucky
consumers “is unlikely to offend the extraterritoriality doctrine of
the dormant commerce clause.
165
The Sixth Circuit’s reasoning
largely accords with the dormant commerce clause jurisprudence
159. Online Merchs. Guild v. Cameron, 468 F. Supp. 3d 883, 901 (E.D. Ky. 2020),
vacated, 995 F.3d 540 (6th Cir. 2021).
160. Id.
161. Id. at 900–02 (noting that third-party sellers “suggest” a price, subject to approval
by Amazon).
162. Id. at 901.
163. Id.
164. Online Merchs. Guild v. Cameron, 995 F.3d 540 (6th Cir. 2021).
165. Id. at 559.
402 Columbia Journal of Law & Social Problems [55:3
as described by this Note, with two important exceptions. First,
extraterritoriality is not itself a distinct doctrine, but is folded into
the two-tiered framework.
166
Second, the court limited its holding
to sales made by third-party sellers based in Kentucky, which
misunderstands modern Supreme Court precedent.
167
Enforcement of price gouging regulations to third-party sellers
on the Amazon Marketplace does not amount to extraterritorial
regulation, even if the seller is located out-of-state. Because each
state’s price gouging regulations apply to only in-state
transactions, no single transaction is subject to regulation by
multiple states.
168
Just as Indiana could validly regulate tender
offers by corporations in Indiana, so too can Kentucky regulate the
sale of price gouged products offered in Kentucky.
169
Put
differently, Kentucky’s price gouging prohibition only applies to
sales made in Kentucky, just as California’s only applies to those
made in California, Michigan’s in Michigan, and so on—regardless
of whether the sale is made in-person at a brick-and-mortar store,
over the telephone, on the website of a local business, or on
Amazon.
170
To argue that the same transaction is subject to
inconsistent regulations only when it is made through Amazon is,
in effect, to argue that there exists a constitutional interest in
nationwide uniformity in prices for goods sold by Amazon third-
party sellers.
171
Moreover, contrary to the holdings of the Sixth Circuit and the
district court, limiting enforcement of Kentucky’s law to only
Kentucky-based sellers actually increases the likelihood of a
dormant commerce clause violation. The state of Kentucky,
defending the state’s price gouging law challenged in Online
166. This has been demonstrated in the preceding Part and will be further explored in
Part IV.A and IV.B.
167. Online Merchs. Guild v. Cameron, 995 F.3d 540, 559 (6th Cir. 2021) (“[T]he
application of [Kentucky’s price-gouging] laws to Kentucky-based third-party sellers on
Amazon in connection with sales to Kentucky consumers is unlikely to offend the
extraterritoriality doctrine of the dormant commerce clause.”).
168. Most states limit the prohibition to only those geographic areas covered by the
emergency or disaster declaration that triggered the regulation. See supra notes 4–44.
169. See CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 89 (1987).
170. See, e.g., Nessel, supra note 35 (voluntary assurance of compliance signed with out-
of-state seller covers only sales made in state).
171. See Regan, supra note 110, at 1880–84. Regan contends that judicial aversion to
inconsistent state regulations is motivated by three areas of constitutional concern: first,
state taxes and the risk of excessive taxation; second, a judicially protected “national
interest in an efficient transportation and communications network;” and third,
extraterritorial regulation, which surfaces in dormant commerce clause decisions. Id.
2022] Price Gouging and the Amazon Marketplace 403
Merchants Guild, disclaimed any intent to enforce the law with
respect to sales made to Kentucky consumers by out-of-state
sellers.
172
Kentucky thereby sought to dispel concerns that the
state would regulate extraterritorially by limiting enforcement to
those businesses located in state. The district judge deemed the
state’s enforcement intent to carry “some weight, but not enough,”
and the Sixth Circuit’s narrowly tailored extraterritoriality
analysis and decision hinged on the district court’s acceptance that
Kentucky would enforce its price gouging laws only with respect to
Kentucky-based sellers.
173
But consider the practical implications
of this narrowed scope of enforcement: if state attorneys general
pledged to enforce their price gouging laws to only to those third-
party sellers located within the regulating state, third-party
sellers could simply ensure their businesses are headquartered or
domiciled in one of the seven states without price gouging
restrictions. Enforcement based on the online seller’s state of
incorporation also creates perverse incentives, as sellers would be
well-advised not to establish physical storefronts in multiple states
for fear of falling within a state’s regulatory purview.
Consequently, the narrow enforcement approach offered by
Kentucky and accepted by both the district court and the Sixth
Circuit is contrary to the Supreme Court’s repeated assertions that
the dormant commerce clause doctrine seeks to “resolve[] market
distortions” and “must not prefer interstate commerce only to the
point where a merchant physically crosses state borders.”
174
Ultimately, in light of the decline of extraterritoriality as an
analytically independent strand of the dormant commerce clause
doctrine, as described in Part III.B, the extraterritorial impact of
enforcing price gouging laws on the Amazon Marketplace is
properly addressed within the traditional two-tiered analytical
framework. To that end, the next Part analyzes the dormant
commerce clause implications of applying price gouging laws to
third-party sellers and to Amazon itself and concludes that neither
application offends the dormant commerce clause.
172. Online Merchs. Guild v. Cameron, 468 F. Supp. 3d 883, 902 (E.D. Ky. 2020),
vacated, 995 F.3d 540 (6th Cir. 2021).
173. Id.
174. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2094 (2018). “The [physical
presence] rule also produces an incentive to avoid physical presence in multiple States.
Distortions caused by the desire of businesses to avoid tax collection mean that the market
may currently lack storefronts, distribution points, and employment centers that otherwise
would be efficient or desirable.” Id.
404 Columbia Journal of Law & Social Problems [55:3
B. PRICE GOUGING REGULATIONS APPLIED TO THE AMAZON
MARKETPLACE
1. Third-Party Sellers
The first inquiry in the dormant commerce clause analysis is
one of categorization: tier one or tier two.
175
Although states have
pursued a variety of regulatory approaches to price gouging, all
state price gouging laws are facially neutral.
176
Moreover, state
price gouging laws do not disfavor out-of-state businesses to the
advantage of similarly situated in-state competitors; rather, these
laws restrict pricing on entire classes of goods and services. To use
a tangible example, consider California’s price gouging law
prohibiting the sale of emergency-related goods or services at
prices more than ten percent greater than the prices charged prior
to the declaration of emergency.
177
This facially neutral law is
similarly neutral in its practical effect because it applies to any
entity selling a covered product, irrespective of the seller’s
location.
178
The first tier of state laws, and its accompanying
“virtually per se rule of invalidity,” accordingly is inapplicable.
179
Under the second tier, a state price gouging law will survive the
Pike balancing standard if the burden to interstate commerce does
not clearly exceed the local benefits. Consumer protection has long
been considered a legitimate interest within the scope of a state’s
police powers.
180
Further, states are afforded broad exercise of
their powers to ensure public health and safety.
181
Thus, price
gouging laws lie at the intersection of the states’ lawful police
powers over consumer protection and public welfare. For such a
law to be voided under the dormant commerce clause, then, the
175. See supra Part III.
176. See supra Part I.
177. C
AL. PENAL CODE § 396 (West 2022) (“Upon the proclamation of a state of
emergency . . . it is unlawful . . . to sell . . . for a price of more than 10 percent greater than
the price charged . . . immediately prior to the proclamation or declaration of emergency.”).
178. See supra Part III.A, for case law and discussion of the first tier of the dormant
commerce clause.
179. See City of Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).
180. See, e.g., Fla. Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 150 (1963) (states
have “traditional power[s] to enforce otherwise valid regulations designed for the protection
of consumers”).
181. See Maine v. Taylor, 477 U.S. 131, 151 (1986) (“As long as a State does not
needlessly obstruct interstate trade or attempt to ‘place itself in a position of economic
isolation,’ it retains broad regulatory authority to protect the health and safety of its citizens
and the integrity of its natural resources.”) (citation omitted).
2022] Price Gouging and the Amazon Marketplace 405
burden imposed on interstate commerce must be “clearly
excessive” to these legitimate local interests.
182
It is useful to first consider the scenario that would impose the
highest burden to interstate commerce: a state, or multiple, issue
a declaration of emergency that triggers the “outright ban” price
gouging regulation, prohibiting any increase in prices relative to
prices charged before the emergency. A third-party seller that
otherwise would raise its prices would be unable to do so on the
Amazon Marketplace without violating these laws. Relatedly,
before a third-party seller raised its prices, it would need to
research whether any state has declared a state of emergency and
triggered price gouging prohibitions, determine whether the
product falls within the scope of the price gouging law, ascertain
the benchmark used by the state to determine whether a price
increase is unconscionable or excessive, and then, finally, increase
the price consistent with those findings.
183
The seller would be
forced to bear considerable compliance costs.
Query, though, whether the costs described above are
particular to price gouging regulations. After all, that a business
must comply with the laws of the country or state in which it
operates is far from novel. A business that operates in one state
need only comply with one state’s laws; a business that operates in
fifty states must comply with the laws of the fifty states. Indeed,
this is the nature of the particular system of federalism in the
United States. That a business may choose to adopt nationwide
the most restrictive regulation required by a particular state does
not raise the specter of the dormant commerce clause: consider, by
way of analogy, the state of California’s emissions standards for
cars and trucks, which automakers have pledged to adopt on a
nationwide scale.
184
Such a routine cost imposed on interstate
commerce is unlikely to be considered “clearly excessive” in
relation to the well-established local benefits of price gouging
regulations.
Thus, states likely will not violate the dormant commerce
clause by applying price gouging laws to Amazon Marketplace’s
182. Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
183. See supra Part II.A.
184. Juliet Eilperin & Dino Grandoni, EPA Moves to Give California Right to Set Climate
Limits on Cars, SUVs, W
ASH. POST (Apr. 26, 2021), https://www.washingtonpost.com/
climate-environment/2021/04/26/california-car-climate-waiver/ [https://perma.cc/Z2D7-F8
HQ].
406 Columbia Journal of Law & Social Problems [55:3
third-party sellers—located within or without the borders of the
regulating state.
185
As the next Part will demonstrate, though,
Amazon is a more desirable regulatory target to maximize
deterrence and minimize enforcement expenditures.
2. Price Gouging Regulations Applied to Amazon
A constitutional challenge to a state’s direct regulation of
Amazon for price gouging will likely involve claims of
extraterritorial regulation, discrimination against interstate
commerce, and excessive burden on interstate commerce.
A state price gouging enforcement action against Amazon does
not amount to extraterritorial regulation in violation of the
dormant commerce clause. As described in Part III.B, the
Supreme Court has displayed a willingness to construe the
dormant commerce clause as capacious enough to accommodate
state regulation of some internet activity.
186
Further, the
regulated transaction involves real-world goods and services,
rather than purely digital or online activity; it is thus especially
unlikely to implicate the extraterritoriality principle because
“[c]oncerns about the cross-border costs of state Internet
regulation are heightened when the sale and transmission of
digital goods as opposed to real-space goods are at issue.”
187
Moreover, Amazon already employs precise geographical filtering
based on the consumer’s shipping address and, notably, uses
different pricing algorithms for consumers in different regions.
188
Amazon’s existing capabilities are significantly more precise and
less costly than the geographical filtering techniques held by
circuit courts sufficient to obviate claims of extraterritorial
regulation.
189
185. Of course, other constitutional restrictions—including due process and
jurisdictional requirements—may otherwise preclude regulation of out-of-state price
gougers. These topics are beyond the scope of this Note, which focuses exclusively on the
dormant commerce clause doctrine.
186. See South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018); see also supra Part
III.B.1.
187. See Goldsmith & Sykes, supra note 123, at 824.
188. See supra Part II.A; see also supra note 59;
supra note 57.
189. A crude geographical filtering technique was sufficient for the Tenth Circuit in
Quik Payday, Inc. v. Stork to hold that the Kansas consumer protection law regulating
payday lending on the Internet did not regulate extraterritorially because it is not
prohibitively burdensome for the payday lender plaintiff “simply to inquire of the customer
in which state he is located while communicating with Quik Payday.” 549 F.3d 1302, 1308–
09 (10th Cir. 2008).
2022] Price Gouging and the Amazon Marketplace 407
Turning to the core of the dormant commerce clause doctrine,
the two-tiered approach: The first tier is readily dispensed with as
inappropriate here, as price gouging laws do not discriminate
against interstate commerce, facially or by effect. The first tier of
the dormant commerce clause analysis, with the “virtually per se
invalid” standard, is inappropriate because price gouging laws are
facially neutral and not motivated by state protectionism.
190
Although Amazon could challenge the law as discriminatory if the
law in practice affects only out-of-state entities,
191
the practical
effect of price gouging laws is not to benefit an in-state economic
interest but rather
192
to regulate price gouging regardless of
whether the seller is in-state or out-of-state. This crucial
distinction from the facts in Hunt v. Washington State Apple
Advertising Commission, where the advantage to similarly
situated in-state entities carried significant weight, indicates that
the decision in Exxon Corp. v. Governor of Maryland would likely
control here.
193
Thus, state price gouging regulations do not
discriminate against interstate commerce, and therefore avoid the
fatal first tier.
194
Analyzed under the Pike balancing approach of the second tier,
price gouging regulations as applied to Amazon do not excessively
burden interstate commerce.
195
The collective operation of various
state price gouging regulations introduces burdens of compliance
on Amazon and other interstate e-commerce firms, not on the
interstate market. But it is the interstate market, not interstate
firms, that the dormant commerce clause protects.
196
Admittedly,
Amazon and other sizable e-commerce sites subject to the law
arguably are the market: Amazon alone represents over forty
percent of the U.S. e-commerce retail market and is one of five
retailers that together comprise over half of online sales.
197
But
190. See United Haulers Ass’n v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S.
330, 338 (2007). The first tier is also inappropriate because the laws are not motivated by
state protectionism. See, e.g., City of Philadelphia, 437 U.S. at 624.
191. That is, where a state has no in-state e-commerce site that would be subject to the
regulation.
192. See supra notes 98–104 and accompanying text.
193. Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978). See also supra notes
98–104.
194. See Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
195. See id.
196. See, e.g., Exxon, 437 U.S. at 127–28.
197. U.S. leading e-retailers 2020, by market share, S
TATISTA (Nov. 30, 2020),
https://www.statista.com/statistics/274255/market-share-of-the-leading-retailers-in-us-e-
commerce/ [https://perma.cc/RWN9-LM66]. As of November 2020, top five online retailers
408 Columbia Journal of Law & Social Problems [55:3
regardless of the size and centrality of Amazon in the e-commerce
ecosystem, the Supreme Court has made clear that the dormant
commerce clause does not protect “the particular structure or
methods of operation in a retail market.”
198
The burden imposed on Amazon or other large e-commerce
entities is not “clearly excessive” in relation to the local benefits.
199
As described above, Amazon already employs sophisticated
techniques to identify the locations of its consumers and
algorithmically control prices and display precise shipping speeds
based those locations.
200
So, the only burden introduced by the
regulation is the possible administrative costs for Amazon to
ascertain that a state of emergency has been declared in a given
market, determine the products covered by the price gouging
regulation that was triggered by the emergency declaration, and
adjust its existing pricing rules to ensure that these products,
when made available for sale in the affected region, priced within
the range permitted by the regulation. As will be discussed below,
these administrative costs can be dramatically lessened by multi-
state agreements on standardization and simplification
practices.
201
To the regulatory and Amazon-internal factors that
militate against excessively burdening interstate commerce, the
deferential and rarely-failed Pike standard adds further assurance
that state price gouging laws as applied to Amazon do not
excessively burden interstate commerce.
202
This, in addition to the
absence of extraterritorial regulation or discrimination, supports
the conclusion that the dormant commerce clause is no barrier to
states enforcing price gouging regulations against Amazon.
Rather, the burden is on Amazon to comply with the laws of the
states in which it exercises the privilege of conducting business
activities.
are Amazon (38.7%), Walmart (5.3%), eBay (4.7%), Apple (3.7%), and The Home Depot
(1.7%).
198. Exxon, 437 U.S. at 127.
199. Pike, 397 U.S. at 142.
200. See supra Part II.A.
201. See infra Part IV.C.3.
202. See supra notes 107–111 and accompanying text.
2022] Price Gouging and the Amazon Marketplace 409
C. STATUTORY REFORMS TO ENHANCE ABILITY OF STATES TO
REGULATE AMAZON
Existing state price gouging laws are not a perfect fit for
regulating e-commerce platforms. States should consider new
statutory language and simplified enforcement regimes to better
insulate against potential constitutional challenges from Amazon.
A newly enacted or amended state price gouging law should take
into account the considerations explored below.
1. Amended Price Gouging Regulations Should Expand Liability
to E-Commerce Platforms
Today’s price gouging statutes can be applied to products sold
by Amazon, but likely require amending in order to hold Amazon
liable for price gouging on sales by third-party sellers on the
Amazon Marketplace. That is because current statutory language
makes it unlawful to sell price gouged goods.
203
Because price
gouging laws speak only of “sellers” of covered products, existing
statutory language should be amended so that the price gouging
regulations make it illegal for e-commerce platforms to, for
example, “facilitate the sale of” or “make available for sale” price
gouged products: this would ensure that the platform provider, like
Amazon, falls within the meaning of the laws even though if it is
not the “seller.”
Any amended statutory language should be written with the
following in mind: regulations that govern one-on-one commercial
transactions of real-world goods are less likely to violate the
dormant commerce clause than are those that govern one-way
transmission of purely digital content.
204
So, laws that expand
liability to e-commerce platforms must be sufficiently limited so
that they do not sweep so broadly as to encompass websites that
merely discuss or provide links to price gouged products.
205
Such
broad regulation risks being challenged as extraterritorial
203. See, e.g., CAL. PENAL CODE § 396(b) (West 2022) (“[I]t is unlawful for a person,
contractor, business, or other entity to sell or offer to sell . . . [price gouged consumer
goods]”); C
OLO. REV. STAT. § 6-1-730 (2022) (making it unlawful for a “seller” to price gouge
during emergencies). The Third Circuit recently held that Amazon is a “seller” for purposes
of strict products liability, as that term is defined by the Second Restatement of Torts
§ 402A. Oberdorf v. Amazon.com Inc., 930 F.3d 136, 143 (3d Cir. 2019).
204. See, e.g., Goldsmith & Sykes, supra note 123, at 813.
205. See discussion supra Part III.B.2.
410 Columbia Journal of Law & Social Problems [55:3
regulation that subjects activity to inconsistent regulations and
chills interstate commerce.
206
To avoid this potential challenge,
statutory language should stipulate that the law applies only to
those e-commerce platforms with significant control over the
transaction terms. Significant control can be determined by
multiple factors, such as whether the platform collects consumers’
billing and shipping information, receives commission or other
form of revenue from the sale, or facilitates shipping or delivery.
207
2. Amended Price Gouging Regulations Should Provide Safe
Harbor for Companies with Limited Online Transactions to
In-State Customers
Price gouging regulations aimed at online marketplaces should
apply a safe harbor to those platforms with only limited sales to in-
state consumers, in keeping with the Court’s helpful dicta in
Wayfair.
208
The Wayfair majority opined that the challenged
South Dakota tax regulation “includes several features that
appear designed to prevent discrimination against or undue
burdens upon interstate commerce.”
209
The first such feature
mentioned by the Court is that the regulation “applies only to
sellers that, on an annual basis, deliver more than $100,000 of
goods or services into the State or engage in 200 or more separate
transactions for the delivery of goods or services into the State.”
210
A similar limiting provision should be added to state price gouging
laws in order to defeat any arguments that small businesses will
be discouraged from entering the e-commerce market.
3. States Should Work Together to Reduce Administrative and
Compliance Costs
The vastly disparate standards among state regulatory regimes
means that “compliance on a national scale is difficult, expensive,
206. See Quik Payday, Inc. v. Stork, 549 F.3d 1302, 1312 (10th Cir. 2008) (contrasting
state regulations of one-on-one transactions with regulations that “govern websites,
bulletin-board services, and chat rooms, which can be accessed by virtually anyone,
anywhere, without control by the one posting the information”).
207. This would, at a minimum, include third-party-seller products that are “fulfilled by
Amazon.”
208. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2099 (2018).
209. Id.
210. Id. at 2089 (citations omitted).
2022] Price Gouging and the Amazon Marketplace 411
and fraught.”
211
High compliance costs risk a judicial
determination that a state has impermissibly burdened e-
commerce.
212
To protect against such a claim, states should
develop uniform definitions of price gouging, standardize
descriptions of covered products and services, and create a simple,
centralized notification system to alert online platforms subject to
the regulations when a state declaration of emergency has gone
into effect.
States can find a model in the Streamlined Sales and Use Tax
Agreement. That Agreement received favorable mention by the
Wayfair Court as an aspect of the South Dakota regime designed
to reduce administrative and compliance costs and thus prevent
undue burden on interstate commerce.
213
Twenty-four states have
adopted the Streamlined Sales and Use Tax Agreement, which
“requires a single, state level tax administration, uniform
definitions of products and services, simplified tax rate structures,
and other uniform rules. . . . [and] provides sellers access to sales
tax administration software paid for by the State.”
214
A similar
system should be employed by states to standardize and simplify
regulation of price gouging.
D. AMAZON OFFERS UNIQUE BENEFITS AS A REGULATORY
TARGET
While the dormant commerce clause does not preclude state
enforcement actions against either third-party sellers or Amazon,
considerations of resource allocation and enforcement strategy
suggest that Amazon is the more desirable target.
211. JONES DAY, supra note 9, at i.
212. This point was made by Chief Justice Roberts in dissent in Wayfair, though on the
narrower issue of the application of the dormant commerce clause to state taxes. In
particular, the Chief Justice criticized the majority for ignoring the costs that state taxation
of remote sellers will impose on retailers, especially small businesses. Wayfair, 138 S. Ct.
at 2103–04 (Roberts, C.J., dissenting) (“Correctly calculating and remitting sales taxes on
all e-commerce sales will likely prove baffling for many retailers. Over 10,000 jurisdictions
levy sales taxes, each with ‘different tax rates, different rules governing tax-exempt goods
and services, different product category definitions, and different standards for determining
whether an out-of-state seller has a substantial presence.’”) (citation omitted).
213. Wayfair, 138 S. Ct. at 2099–2100 (majority opinion).
214. See About Us, S
TREAMLINED SALES TAX GOVERNING BOARD, INC. (last visited Mar.
29, 2022), https://www.streamlinedsalestax.org/about-us/about-sstgb [https://perma.cc/7A4
W-88T9].
412 Columbia Journal of Law & Social Problems [55:3
1. Third-party Sellers as an Enforcement Target: High
Regulatory Resource Allocation and Inefficient ‘Whack-a-Mole’
Strategy
The chief benefit of pursuing enforcement actions against third-
party sellers is that today all states with price gouging regulations
already have the statutory authority to apply the law to Amazon
sellers, without amending existing statutory language. The
downsides to the approach, however, likely overwhelm this first-
order convenience.
First, challengers to state regulation of price gouging by third-
party sellers have already tasted success with Online Merchants
Guild. Any future enforcement efforts will surely be heavily
litigated and the long-term goal will require enough successful
litigations for the third-party sellers to feel that the risks of
engaging in unlawful price gouging outweigh the benefits. Not
only is this a lengthy endeavor, but it also requires tremendous
resources. Moreover, the possible dormant commerce clause
concerns, described above, are more serious in an enforcement
action against third-party sellers than against Amazon. What’s
more, applying price gouging regulations to third-party sellers
largely maintains the status quo of enforcement: post hoc and
resource intensive.
2. From an Optimal Deterrence Perspective, Amazon is the Ideal
Enforcement Target
To the constitutional authority of states to take enforcement
actions, traditional optimal deterrence considerations add a
compelling reason to do so. Optimal deterrence in the context of
law enforcement considers the marginal cost of enforcement—that
is, regulatory resource allocation—in relation to the marginal
social benefit of preventing the unlawful conduct.
215
As detailed in
Part I, each price gouging enforcement action requires an
extraordinary amount of regulatory resources. It is easy enough
for regulators to spot possible price gouged products on Amazon,
215. See Amitai Aviram, Allocating Regulatory Resources, 37 J. CORP. L. 739, 743 (2012).
This optimal deterrence model is associated with the law and economics school of legal
scholarship. Anti-price gouging law enforcement is well suited to such an economic analysis
of decision-making because benefits and costs are purely financial. See generally Gary S.
Becker, Crime and Punishment: An Economic Approach, 76 J.
POL. ECON. 169, 207–09
(1968).
2022] Price Gouging and the Amazon Marketplace 413
but it is the investigation that takes up the time and resources.
Investigating individual third-party sellers is especially costly.
216
Treating Amazon as the centralized single target of liability
dramatically reduces “regulatory spend.” At the same time,
Amazon is much more likely to be deterred by a regulatory action,
real or threatened, because the sheer volume of price gouged
products sold through the site exposes the company to significant
monetary penalties, not to mention the negative publicity that
would attend a widescale legal action.
217
In short, Amazon may
face pressure to comply with a state’s price gouging law if the cost
of noncompliance is too great.
218
Consequently, targeting Amazon
could produce a tectonic shift in regulation of price gouging,
shifting from piecemeal post hoc enforcement efforts to a system of
compliance that prevents price gouged products from appearing on
Amazon Marketplace in the first place.
CONCLUSION
The COVID-19 pandemic highlighted the profound inability of
state regulatory regimes to police online price gouging. Online
price gouging and the ineffective regulatory responses
demonstrate the need for a changed approach to enforcing price
gouging laws. Concerns that the dormant commerce clause
precludes states from regulating price gouging on online retail
platforms like the Amazon Marketplace are misplaced given the
weight of authority on the dormant commerce clause and the
internet. Indeed, judicial constructions of the dormant commerce
clause as adaptable enough to allow some state regulation of online
activity is a trend of the past two decades and has now received
approbation by the Supreme Court.
The dormant commerce clause does not categorically prohibit
state regulation of price gouging by third-party sellers or by
Amazon itself. Moreover, Amazon is the ideal regulatory target to
prevent price gouging, rather than the current piecemeal, post hoc,
ineffectual approach to enforcement. With some modifications to
existing statutory language, states can better position themselves
to enforce price gouging prohibitions against Amazon.
216. See supra Part II.
217. See Bae, supra note 4, at 95–96.
218. See Alex Raskolnikov, Probabilistic Compliance, 34 Y
ALE J. ON REG. 491, 496
(2017) (“[G]reater certainty . . . generally leads to greater compliance.”); Robert D. Cooter,
Economic Analysis of Punitive Damages, 56 S.
CAL. L. REV. 79, 79 (1982) (“For most
potential injurers, it is far cheaper to comply with the law than risk liability.”).
