As retailers get ready to take on Amazon in Australia, the US organization Consumer Watchdog has accused the online retailer of deliberately inflating the recommended retail price of goods on their site, a practice that the Australian Competition & Consumer Commission has moved to stamp out in Australia.
In one incident Amazon was selling an Acer 12-inch laptop with a crossed-out list price of $799. Acer, however, sells the same device on its website for $749.99.
A study commissioned by Consumer Watchdog found that abuse of the pricing system was wide spread, affecting more than a quarter of the 4,000 products examined by the advocacy group on Amazon.com.
The LA Times claims that the larger the difference between the two lots of pricing, the more likely consumers will be drawn to buying the item.
Following a spate of lawsuits Amazon has now moved to phase out list pricing, a controversial practice which the retailer was accused of using to deceptively inflate how much consumers save through the e-commerce giant.
The LA Times claims that very few people know how Amazon determines the list price, which critics say could be arbitrarily inflated to create the appearance of a steeper discount.
The company says on its website that list price means the suggested retail price of a product as provided by a manufacturer, supplier or seller.”
In a statement, Amazon called the Consumer Watchdog report misleading.
“Manufacturers, vendors and sellers provide list prices, but our customers care about how the price they are paying compares to other retailers,” the company said. “We validate list prices against actual prices recently found across Amazon and other retailers, and we eliminate List Price when we believe it isn’t relevant to our customers.”
The company said it has also introduced a “was” price using recent price history of the product on Amazon. That provides customers with “an alternative reference price when we don’t display List Price,” the statement said.
In Australia, several Companies have been caught out and fined for engaging in the same practices.
In 2016, Online retailer Kogan was forced to pay paid penalties totaling $32,400 following issue of three infringement notices by the ACCC.
The ACCC issued the infringement notices because it had reasonable grounds to believe that Kogan had made false or misleading representations about the price of three computer monitors advertised during a Fathers’ Day promotion on its eBay store, in contravention of the Australian Consumer Law.
At the time Kogan claimed that consumers would receive a 20% discount on the following computer monitors if they were purchased between 24th and 29th August 2015:
Kogan 27” Cinema Display WQHD;
Kogan 28” 4k LED Monitor; and
Asus 27” LED Monitor PB278Q.
A new study of Amazon’s “list” prices could provide evidence that the online retail giant’s reference prices belong in the same category as some of its best-selling books: fiction.
The study commissioned by Consumer Watchdog and first reported by the Los Angeles Times found that a majority of Amazon list prices reviewed by the advocacy group were greater than the price at which the product is generally sold. In many cases, the group said, the list price was a “completely fictitious price” that no one charged.
“A company cannot claim it’s discounting something from a certain price when virtually nobody charges that amount,” said John Simpson, privacy project director at Consumer Watchdog. The group has called on the California attorney general to investigate Amazon’s pricing practices that it says violates both California and federal law. The group also alerted the FTC.
Amazon uses list prices to advertise big savings. By placing the higher list price above a lower sale price, consumers think they’re getting a great deal. But Amazon has come under increasing scrutiny regarding these purported savings. In January, Amazon agreed to pay more than $1 million to settle allegations by Canada’s Competition Bureau that it failed to verify that the list prices provided by its suppliers were accurate on its Canadian site. Amazon agreed to make changes to the way it advertises list prices on not only its Canadian site but on Amazon.com too. Amazon also faces a class-action lawsuit over the pricing practice.
While Amazon has begun to phase out list prices, Consumer Watchdog still found them advertised on more than a quarter of more than 4,000 product listings. One such example is this Chicago Pneumatic brand drill with a crossed-out list price of $305 and a sale price of $182.99, which equates to a purported discount of 40 percent:
But according to Consumer Watchdog:
In fact, all of Amazon’s competitors sold the same drill for roughly the same price. Jet.com and two retailers on Amazon Marketplace matched Amazon’s sale price exactly, while Walmart and construction goods retailer zoro.com sold the drill for $189.99. According to Nextag.com, the highest price the drill fetched on any retailer over the past six months was $210.
In response to an inquiry by TINA.org, Amazon called the Consumer Watchdog study “misleading,” adding:
We validate list prices against actual prices recently found across Amazon and other retailers, and we eliminate list price when we believe it isn’t relevant to our customers.
A number of major retailers including J.C. Penney, Macy’s, and Kohl’s have come under legal fire for allegedly overstating savings by comparing sale prices to list prices that have no basis in reality. Find more of our coverage on the issue here.