The California-based Consumer Watchdog group claims Amazon is misleading its customers by posting inflated list prices to give the impression the company is offering more of a discount.
The nonprofit public-interest group filed a petition to Calif. Attorney General Xavier Becerra on Monday, claiming Amazon is violating state and federal law because, Consumer Watchdog said based on its own study in February, many products Amazon’s website feature list prices that are greater than the existing market price.
“The reference prices were an entirely bogus notional price that created the false impression that customers were getting a deal when they were not,” the petition, written by John Simpson, Privacy Project director for Consumer Watchdog, reads.
List prices — or reference prices — are posted on some products sold on Amazon to show the difference between a competitor's price and Amazon’s.
Consumer Watchdog reviewed more than 4,000 products sold by the retail giant and found that references prices were included on more than a quarter of Amazon’s stock. The study found around 40% of the list prices used were larger than the highest price charged by any competitor for the same item.
The Federal Trade Commission standards warn against inflating list prices, as the Consumer Watchdog notes in its petition.
"If the list price is significantly in excess of the highest price at which substantial sales in the trade area are made, there is a clear and serious danger of the consumer being misled by an advertised reduction from this price," the FTC says.
The Consumer Watchdog study was conducted from Feb. 3 through Feb. 6.
“This reference price creates the impression that the consumer is getting a deal because the price paid is substantially lower the one with the line through it,” Simpson wrote in the petition. “The catch is the product is actually widely available from many other outlets at prices much lower than the crossed-out reference price on the Amazon website.”
Amazon said the report from Consumer Watchdog was misleading in a statement to the Los Angeles Times.
“Manufacturers, vendors and sellers provide list prices, but our customers care about how the price they are paying compares to other retailers. We validate list prices against actual prices recently found across Amazon and other retailers, and we eliminate Lis Price when we believe it isn’t relevant to our customers,” the company told the Times.
An Amazon representative did not respond to request for comment from MONEY.