A consumer group is urging federal regulators to block Amazon's purchase of Whole Foods Market until the online giant stops "deceptive pricing practices."

In a letter to the acting heads of the Department of Justice's Antitrust Division and the Federal Trade Commission's Bureau of Competition, Consumer Watchdog repeated an earlier claim that Seattle-based Amazon "continues to deceive consumers by falsely leading them to believe they are getting larger discounts than is actually the case."

Citing a study released by the group in March, Consumer Watchdog's John M. Simpson claimed reference prices designed to illustrate potential savings by the buyer are much higher -- 70 percent, on average -- than the maximum observed price.

"These reference prices often have no basis in reality," Simpson wrote. "Amazon is not competing on the basis of price in a way that would benefit consumers. Rather, it is competing deceptively by claiming a discount from an entirely bogus price."

A new report by the group showed that Amazon's historical (or "was") prices -- an alternative to the "list" prices studied in March -- were just as deceptive. Simpson claimed that nearly 40 percent of the reference prices on the 1,000 items studied were higher than any observed price charged by Amazon.

Before-sale prices were the most misleading reference prices, according to Consumer Watchdog, exceeding the maximum observed price over the preceding 90 days 97 percent of the time. The group found that 84 percent of sale items included a reference price higher than any ever observed on the site.

Conversely, the group found that "strikethrough" prices, which appeared in 30 percent of the items studied, were accurate. That led Simpson to theorize that Amazon is "experimenting with alternatives to the debunked list price that continue to deceive consumers." 

Consumer Watchdog urged federal officials to hold up the online retailer's $13.7 billion purchase of Whole Foods, citing antitrust law that holds "that companies are supposed to compete on the basis of price and quality."

"We call on you to protect Whole Foods’ brick-and-mortar customers by blocking Amazon’s acquisition of the supermarket company until it makes a legally-binding commitment to halt its deceptive and illegal use of reference prices to deceive American consumers," Simpson wrote, while also calling for a formal monitoring system for Amazon.

Amazon denied the allegations in a statement, calling the new report "misleading."

"We are obsessed with maintaining customer trust, and work hard to provide meaningful reference prices," an Amazon spokesperson said. "We use a variety of systems to validate reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers."

In January, Amazon was fined over $1 million CAD by Canada's Competition Bureau over misleading prices after an investigation found that Amazon didn't confirm the accuracy of list prices from suppliers.

Amazon made changes to how it displays pricing after the settlement.

Seattlepi.com reporter Daniel DeMay contributed to this report. Stephen Cohen can be reached at 206-448-8313 or [email protected]. Follow Stephen on Twitter at @scohenPI.

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