Is Amazon misleading its customers?


Amazon is almost ready to lock down its mega-merger with Whole Foods, but one of its most controversial sales practises may be starting to haunt it.

It is reported that investigation is being conduct by the Federal Trade Commission about claims that Amazon is misleading customers with its price comparisons on its products.

The unofficial investigation will look into the listed price on items, that retailers use to show how much their customers are saving.

Consumer Watchdog, the group that filed a complaint reviewed around 1,000 Amazon products and those reference prices were used on more than nearly half of the products. Around 60 percent of those products were never sold by the Amazon at the “before sale” list price or higher in the last 90 days, which tells that promotions did not really reduced prices as claimed by Amazon.

“Amazon must not be allowed to expand these deceptive practices to a whole new pool of unsuspecting customers,” Consumer Watchdog’s letter to the FTC reads.

“We call on you to block the proposed purchase of Whole Foods until Amazon formally consents to stop its deceptive, unfair and anticompetitive pricing.”

Its rules regarding the former warn businesses not to use “fictitious” or “inflated” reference prices to create the illusion of a bargain.

“In such a case, the ‘reduced’ price is, in reality, probably just the seller’s regular price,” the guidelines say.

More information was being collected by the agency right after the letter was filed. Officials wanted to move fast to meet the legal deadline for the next step in this investigation, in which case the data will be requested by Amazon.

Spokesperson for Amazon said that analysis made by Consumer Watchdog is “deeply flawed” and was “based on incomplete data and improper assumptions.”

“The conclusions the Consumer Watchdog group reached are flat out wrong,” the spokesperson said in a statement. “We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

The news about investigation comes in midst of speculation about is the Whole Foods deal is a too big bite in Amazon’s ambitious accumulation of consumer market power. An hedge fund manage claimed last week that lawmakers are thinking about starting a case against Amazon regarding the antitrust. A hearing was also called by the House’s market competition committee member on that matter.

Leading antitrust experts agreed, that there is little basis for an argument that the merger is violating competition law, at least in the narrow, consumer-centric way it’s currently practiced in the country.

On the other side, list prices accusation could change the equation should the FTC find it has merit, because it involves consumer harm.

This isn’t the first time the practice has landed Amazon in hot water. In January the company paid a $1 million fine to Canadian regulators after they found that the company’s list prices didn’t match those of the market at large.