Consumer Watchdog Takes Fight Against Online Giant Amazon's Deceptive Pricing to 11 States

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Aug 24, 2017, 13:07 ET

SANTA MONICA, Calif., Aug. 24, 2017 /PRNewswire-USNewswire/ -- Consumer Watchdog took the fight against Amazon's deceptive pricing practices to the state level today after the Federal Trade Commission approved a $14 billion deal for the online retailing giant to buy Whole Foods.

The nonpartisan nonprofit public interest group filed petitions asking 11 state attorneys general to act against Amazon's deceptive pricing. Backing up the petitions were two in-depth studies showing how Amazon uses bogus reference process to leave the impression with consumers that they are getting discounts when, in fact, they are not.

"In light of the FTC's decision to allow Amazon's acquisition of Whole Foods, your action on this matter is all the more important," the petitions said. "Amazon's lawyers have aggressively used their arbitration clause to foil efforts by consumers to hold the company accountable for its deceptive pricing. Attorneys General like you are literally their last resort."

"The FTC has repeated its pattern of leaving high-profile enforcement action to others, as it did when it left it to the Europeans to bring an antitrust case against Internet giant Google, by giving Amazon a pass for its deceptive pricing practices," said John M. Simpson, Consumer Watchdog Privacy Project Director. "We're taking the issue to the states, where we hope to find a true commitment to protect consumers."

Consumer Watchdog said that consumer protection increasingly falls to the states as the Trump administration sets aside obligations to enforce the law and prevent consumer harm. Internet privacy protection is a good example, the group said, noting that after Trump signed a law killing Federal Communications Commission privacy rules for Internet service providers, the effort to enact legislation has moved to the states. For example, AB 375 is pending in the California Legislature.

Consumer Watchdog petitioned the attorneys general of Colorado, Illinois, Iowa, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Virginia and Washington.

Read a sample petition (to Virginia Attorney General Mark Herring) here: http://www.consumerwatchdog.org/resources/ltrvirginaag082417.pdf

"Many items Amazon sells through its website give the selling price as well as a price with a line through it, a reference price. This reference price creates the impression that the consumer is getting a deal because the price being charged is substantially lower the one with the line through it," the petitions said. "The catch is that the product is actually widely available from many other outlets at prices much lower than the crossed-out reference price on the Amazon site. Two studies done for Consumer Watchdog found these reference prices frequently to be deceptive, with little basis in reality."

Here are the highlights of what was found in the first study:

Amazon included reference (crossed-out) prices on more than a quarter of its stock.
A majority Amazon's crossed-out prices were greater than the prevailing market price, regardless of how the prevailing price was defined (between half and three-quarters, depending on measure used).
About 40 percent of Amazon's crossed-out prices were greater than the highest price charged by any known competitor.
On average, Amazon's reference prices overstated the median market prices by $22, or about 20 percent.
Amazon Marketplace vendors also post reference prices in excess of the prevailing market price, but they do so less frequently and to a lesser degree than Amazon itself
Amazon appears to be in breach of its own List Price policy, and its practices appear to violate federal regulations governing deceptive pricing.

Consumer Watchdog's second study found that:

Amazon displayed reference prices on 46 percent of the products surveyed—a sharp increase from the similar sample taken in February. They now employed several different kinds of reference price, including "was" prices, "sale" prices and before-sale prices, or simply prices with a line through them ("strikethrough prices"). The evidence suggests they are experimenting with alternatives to the debunked list price that continue to deceive consumers.
61 percent of all reference prices were higher than any observed price charged by Amazon in the recent past 90 days. At the same time, 38 percent of all reference prices were higher than any price charged by Amazon in observed history. In other words, in nearly four in ten cases, Amazon never appeared to charge the previous price from which it claimed to be discounting. The "price" was entirely fictitious.
Amazon inflated its reference prices by a significant amount. On average, they exceeded the maximum observed historical price of the product by 70 percent.
More than 62 percent of Amazon's "was" prices exceeded the maximum price observed within the previous 90 days. More than 27 percent of "was" prices were higher than any price charged by Amazon in all observed history.
Before-sale prices were the most misleading type of reference price employed. Amazon's reference price on sale items exceeded the maximum price observed within the preceding 90 days an astonishing 97 percent of the time. 84 percent of Amazon's reference prices on sale items were higher than any previous Amazon price for the item in observed history.
By contrast, strikethrough prices were found to be highly reliable. All prices with just a line through them (and no words suggesting what they referenced) corresponded to actual prices charged by Amazon in the recent past. This suggests that Amazon can accurately represent prior prices if it wishes.
Overall, Consumer Watchdog's findings suggest that Amazon continues to flout Federal Trade Commission regulations on deceptive pricing.

The petitions to the state attorneys general concluded:

"Consumer Watchdog believes Amazon and its executives are cynically flouting trade regulations to increase sales and profits. A company cannot claim it's discounting something from a certain price when virtually nobody charges that amount. It can't claim a "was" price when it never existed. It's false advertising, as well as an unfair and deceptive practice violating the Federal Trade Commission Act. We call upon you to take immediate action to hold Amazon and its CEO Jeff Bezos accountable for this outrageous abuse."

Read Consumer Watchdog's June report, "Amazon's New Consumer Deception", here: http://www.consumerwatchdog.org/resources/historicalpricesfinal070617.pdf

Read the March report, "Is Amazon Moving Away from Misleading List Prices? Not So Fast," here: http://www.consumerwatchdog.org/resources/atp_pricing_2.0.pdf

Visit our website at www.consumerwatchdog.org

SOURCE Consumer Watchdog