The Federal Trade Commission recently announced that it is looking into allegations that Amazon.com posted false sales prices as part of their review of the company’s merger with Whole Foods. This was partially in response to a petition sent to it by the advocacy group called Consumer Watchdog. They had performed 2 studies of Amazon’s advertised prices and did not like what it saw.
According to Yahoo Finance, Consumer Watchdog surveyed 1,000 products, 46% of which listed what is called a reference price, or a ‘list’ price. This price was supposed to be the original price before a sale or discount went into effect. This ‘list’ price would be crossed out, and a new, lower price would be underneath. They claimed that 61% of the time in the Consumer Watchdog’s survey, Amazon’s reference price was higher than the price of the same product was 3 months ago.
As a result of their survey, they sent a petition to Attorney General Xavier Becerra and the FTC, explaining that they felt that the pricing scheme violated Article 1, Sec. 17501 of the California Business and Professional Code. Amazon says that the study was flawed and came to false conclusions. Indeed, that pricing scheme is much rarer on their website these days.
The FTC is also looking in to a similar complaint about Amazon’s Prime Day prices. Consumer Watchdog accuses Amazon of making deceptive claims about the percentage of their discounts on their Prime Day deals. Amazon advertises these prices to customers who sign up for their loyalty program in order to boost summer sales.
This would not be the first online company to face these charges. In 2014, Overstock.com was fined by a California Court for a similar practice. Until 2007, their pricing policy allowed them to hunt for the highest price charged for an item to use as a comparison for their prices. They did not bother to find out if other online retailers had sold a substantial amount of the product at the price that they used for their comparison. The trial court decided that this constituted false advertising according to section 17500 of the Bus. and Prof. Code, and that it was an unfair business practice. They had to pay $6.8 million for deceptive advertising, and the court granted injunctive relief.
The important thing to remember is that online retailers are subject to many of the same rules companies with physical stores, and that you haven’t you seen as many cases involving them only because the on-line retailers are newer. This means that section 5 of the Federal Trade Commission Act, which prohibits deceptive practices, applies. Section 5 says that a practice is deceptive it is likely to mislead customers and affect their decision regarding a product. A violation must also cause an injury or is likely to cause an injury that is not reasonably avoidable, substantial and not outweighed by any benefit. If the FTC decides that Amazon.com‘s pricing scheme meets these criteria, that company will be in the same trouble as Overstock.com, and it may injure their proposed merger.
Amazon hasn’t been tried yet for their pricing scheme, and they do refute the charges.
At this point, it is all just a reminder that you, the consumer, have rights, even when you shop on an on-line website. If you suspect that a website is using false reference prices to manipulate you into buying something, you have the right to report it to the FTC and to contact a lawyer.
Fortunately, this is the type of case that we at Aiman-Smith And Marcy specialize in. We are a boutique law firm with a focus on consumer and employment law, as well as class action lawsuits. Feel free to contact us anytime.
