When you say you’re selling an item for 30% off of some higher original price, there are rules about how real that “original” price has to be. If that reference is made up, or the item never actually sells for that price, you can land yourself in some legal trouble. And now sources say that the Federal Trade Commission is having a look to see if that’s what Amazon is up to.
“A source close to the probe” tells Reuters that the investigation stems from a complaint from a letter advocacy group Consumer Watchdog sent to the FTC.
The letter, dated July 6, asks the agency to look into Amazon’s advertised pricing strategies as part of a review of the company’s recently-announced plan to buy Whole Foods for $13.7 billion.
The organization looked at 1,000 products on Amazon’s website in June and reportedly found that among the ones that included a reference price, more than 60% of those reference prices were higher than the price the product had sold at for at least 90 days.
Put another way, that means that Consumer Watchdog says that more than half the time, items selling with a description like “$80, 20% off of original $100 price” were never actually sold for $100 at all.
The FTC “made informal inquiries” about the claims after receiving the letter, Reuters reports, but it is not yet known if the commission will open a formal investigation on the matter.
Consumer Watchdog released a report in May with very similar findings. That report looked at listings for 4,000 products and found that in nearly 40% of cases, the prices displayed were using reference prices out of whack with everyone else.
So for example, one item in Consumer Watchdog’s report was a drill that Amazon was selling for $183, claiming it was a 40% discount from the original price of $305. But other retailers, including Walmart and Jet.com (which is now also owned by Walmart) were also selling the same item for $183 – $190, without mentioning a $300 selling point anywhere.
Amazon has for roughly a year now been removing some reference prices from display on the site.
When Consumer Watchdog released its report in May, Amazon called it “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.”
About the group’s July letter, Amazon tells Reuters, “The conclusions the Consumer Watchdog group reached are flat out wrong.”
A Closer Look
That the FTC appears to be actually looking into the pricing complaint against Amazon indicates that the commission is likely taking a serious look at the merger plan, Reuters notes.
Meanwhile, Rep. David Cicilline (RI) is asking the Hose antitrust subcommittee (under the Judiciary Committee) to take a deeper look at the merger plan. And on the Senate side, Sen. Cory Booker told Recode recently that he and other members of the Senate are planning to send a letter to the Justice Department raising concerns with the Whole Foods deal and asking for greater scrutiny of the merger.
Reuters also notes that Amazon settled similar misleading pricing allegations with Canada’s authorities in January, paying a fine of CAD $1 million (about $796,000, at today’s exchange rate).