Scalping refers to the practice of buying products, usually limited edition or high demand items like concert tickets or gaming consoles, and then reselling them at a higher price for a profit. While some view it simply as an entrepreneurial pursuit, many argue that scalping should be illegal for several reasons.
What is Scalping?
Scalping involves purchasing a product, often using bots or predatory tactics to buy up limited stock, with the sole intent of reselling at a higher price. Scalpers take advantage of scarcity and high demand to make a quick profit. This could involve buying up all the tickets to a popular concert and immediately posting them on resale sites at exorbitant markups. Or buying up all the stock of a newly released gaming console or graphics card and selling at double or triple the retail price.
Some key characteristics of scalping:
– Taking advantage of limited supply and high demand
– Using bots or other means to quickly buy up stock
– Immediately relisting the products at much higher prices
– Making large profits by exploiting scarcity and enthusiasm
Scalping is sometimes called aftermarket selling, but many argue it is distinguishes by the predatory tactics and large markups involved.
Examples of Scalping
Some common examples of scalping include:
Concert and Event Tickets: Scalpers will buy up all the tickets to popular concerts and events sometimes within minutes of them going on sale. For example, tickets with a face value of $100 may get immediately listed for $500 or more.
Limited Edition Sneakers: Sneakerheads have complained of scalpers buying up all the stock of limited edition sneakers either manually or using bots. The shoes are then resold at huge markups, making them unaffordable for average consumers.
Game Consoles: New game consoles like the PS5 are prime targets for scalpers using bots. The consoles retail for $500 but often get resold for $800-$1,000+ after scalpers buy up all the inventory.
Graphics Cards: PC gamers have accused scalpers of using bots to buy up scarce graphics cards like the Nvidia RTX 3080 on launch day, relisting them on eBay at double the MSRP.
Toys: Scalpers have infamously bought up all the stock of popular toys during the holidays. For example, they might buy all the Tickle Me Elmo dolls and resell at 3-4 times the retail price.
COVID-19 Essentials: During the COVID-19 pandemic, scalpers were criticized for hoarding essentials like masks and sanitizers only to resell them at outrageous prices during shortages.
Why is Scalping Problematic?
There are several reasons why many people argue scalping should be illegal:
It exploits enthusiasm and locks out regular consumers: Fans who just want to attend an event or buy a product at retail price get locked out and taken advantage of. Scalpers exploit their enthusiasm and make it difficult to buy a product at a fair price.
It often relies on predatory tactics: Scalpers often use bots, server exploiting programs, and other shady tactics to buy up inventory faster than normal consumers can. This makes the playing field unfair for the average enthusiast.
It encourages artificially inflated prices: Scalpers don’t add any value, they only restrict supply to drive up resale prices. This leads to customers paying 2-10x the price for no added benefit.
It disproportionately affects less affluent consumers: While wealthy consumers may be able to pay inflated scalper prices, regular middle or low-income consumers get priced out of products they want.
It contributes to shortages: Scalpers hoard products only to try and resell. This contributes to artificial product shortages that wouldn’t exist if products reached normal consumers.
Scalpers don’t honor return or warranty policies: Customers buying resold products often cannot actually return or exchange them if needed. They also lose out on manufacturer’s warranty.
It allows no room for genuine collectors: For products like trading cards, scalpers leave no stock for genuine collectors who intend to keep the products.
Scalping distorts the market: Scalpers create false demand and price gouging. This distorts the actual market value of products.
Counter Arguments in Favor of Scalping
Some arguments that have been made in defense of scalping include:
Scalping provides supply where there is excess demand: Scalpers alleviate shortages by providing products to people willing to pay higher prices when demand exceeds supply.
It allows “price discovery” in inefficient markets: Scalpers help find the true market equilibrium price for products especially where initial pricing fails to capture full demand.
Scalpers provide convenience to customers: Some may willingly pay more to obtain products immediately from scalpers versus trying to buy at retail.
It’s just a business opportunity like any other: Scalpers are simply running a business by buying products and reselling at market rates, much like other retailers do.
Banning it would restrict free enterprise: Outlawing scalping would be government overreach into the free market according to capitalism principles.
Manufacturers could increase production if needed: Critics argue producers should simply make more stock available rather than blaming scalpers for shortages.
Ethical Considerations
However, there remain strong ethical arguments against scalping:
It exploits vulnerable enthusiasts: Scalpers intentionally exploit fans who have an emotional attachment to products like concert tickets or games.
It removes products from ordinary consumers: Scalpers deprive normal consumers, especially lower-income ones, from buying products.
It often relies on shady tactics: Scalper tactics like bot use, server straining, warehouse raiding etc. are ethically dubious.
It contributes to artificial shortages: Scalpers create fake scarcity by hoarding products, worsening shortages.
It disrupts communal activities: Scalped events and conventions become exclusionary and harm the communal nature of live experiences.
It disregards manufacturer’s intentions: Scalping goes expressly against manufacturer wishes and their efforts to provide affordable products.
It raises safety issues: Scalped events may lack adequate security, safety measures, and insurance when resold illegally.
So while scalpers contribute to supply, their methods remain highly unethical. A fairer system of price discovery and free enterprise may exist.
Scalping Laws Around the World
Many parts of the world recognize scalping as detrimental and have passes laws against it including:
Country | Scalping Laws |
---|---|
United States | Anti-scalping laws exist in around 15 states that cap price markups on resold tickets. |
United Kingdom | The Consumer Protection Act bans reselling tickets for football matches at more than face value. |
Italy | Scalping is illegal and punishable by fines up to €10,000 under the 1992 Public Safety laws. |
Germany | Reselling event tickets above face value without organizer’s permission is banned under the 2015 Act against Ticket Scalping. |
Belgium | Scalping is a criminal offense punishable by up to 5 years in jail and £50,000 in fines. |
France | Scalping is illegal for sporting events, concerts etc. and violators face fines up to €15,000. |
However, only a few US states have scalping laws, while it remains fully legal in countries like Canada and Australia. More comprehensive policies are needed globally.
Potential Policy Solutions
Some potential policy and technical solutions that could combat scalping include:
Product Lotteries: Release limited stocks via randomized lotteries to regular consumers only. This prevents scalpers cornering inventory.
Purchase Limits: Restricting individuals to 1-2 product purchases makes bulk scalping purchases difficult.
ID Verification: Require ID proof on ticket purchases and limit resales to deter scalper bulk buys.
Paperless Tickets: Issue digital tickets tied to buyer IDs that cannot be resold or transferred.
Captchas: Use CAPTCHA tests to block bulk bot purchases often used by scalpers.
Staggered Releases: Release product inventory in consistent, smaller batches to deter sellouts.
MSRP Price Controls: Legally cap ticket or product resale prices to remain under 1.5X MSRP.
Void Resales: Allow manufacturers to cancel or void any resold scalper purchases and return stock to retailers.
Blacklist Resellers: Block known scalpers from retailer membership programs and discount sales.
Conclusion
In summary, scalping is an exploitative practice that relies on shady tactics to profit off artificial scarcity at consumers’ expense. It exploits enthusiasts, excludes ordinary buyers, disregards manufacturers’ intentions, and damages communal activities. While counterarguments around free markets exist, scalping remains fundamentally unethical. And despite some anti-scalping laws, more comprehensive policies are needed globally to stamp out this predatory practice. Potential solutions include product lotteries, purchase limits, staggered releases, price control caps, and digital tickets. With both ethical and economic arguments heavily against scalping, banning the practice could benefit consumers and return fairness to dysfunctional markets.