Is Amazon Honest About Its Pricing Model?

The Federal Trade Commission is looking into allegations that e-commerce innovator Amazon has been a bit deceptive about its pricing practices.

Consumer Watchdog analyzed 1,000 items listed and sold on Amazon. The advocacy reported that the retailer often shows “previous” price listing, alleging that these are designed to provide the user with the idea that the new price is a big discount from the old one. These “previous” prices replace what Amazon used to describe as the “list price” for the item, which means that the site does not reflect , which it alleges are designed to give the appearance of big discounts.

According to its report, “Amazon displayed reference prices on 46 percent of the products surveyed—a sharp increase from a similar sample taken just months before. They now employ several different kinds of reference price, including ‘was’ prices, ‘sale’ prices, or simply prices with a line through them (‘strikethrough prices’).”

The Consumer Watchdog report also alleges that Amazon boosted the reference (“list”) price to roughly 70 percent above the historical price of the item (before “marking them down”).

The consumer advocacy site said that one example shows shows Amazon’s before-sale price on a pack of LED light bulbs was nearly $100, but the pack was being offered on the site for a mere $14.99, making sure to note that customers would save $85. More importantly, though, Consumer Watchdog noticed that Amazon had not charged more than $14.99 for the same item within the last 3 months.

The report details: “Amazon appears to be increasing its use of reference prices on its site since last year, when it quietly eliminated many list prices. However, the result is the same: Amazon’s customers are being deceived into thinking they are getting a bargain, when in most cases they are not.”

As such, Consumer Watchdog is now saying that the recent Whole Foods acquisition should be prohibited; at least postponed until Amazon changes these pricing strategies.

Amazon, of course, refuted Consumer Watchdog’s pricing report. In response, the e-commerce giant contested: “The study issued by Consumer Watchdog is deeply flawed, based on incomplete data and improper assumptions. The conclusions the Consumer Watchdog group reached are flat out wrong. We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

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