Home > Sales & Marketing > Advertising > Amazon Accused Of Questionable Pricing

Amazon Accused Of Questionable Pricing

As retailers get ready to take on Amazon in Australia, the US organisation Consumer Watchdog has accused the online retailer of deliberately inflating the recommended retail price of goods on their site, a practise 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 practises.
In 2016, Online retailer Kogan was forced to pay paid penalties totalling $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.

Before or at the start of the promotion, Kogan increased the prices of the three computer monitors featured on its eBay store.

As a result, Kogan claimed consumers received a 20% discount off the newly increased prices, they in fact only received a 9% discount off the previously advertised prices for each of the three computer monitors.

Also in the firing line for dodgy online pricing has been the Epharmacy Group the owner of the websites for Chemist Warehouse, My Chemist, and Epharmacy, has paid penalties totalling $32,400 following the issue of three infringement notices by the Australian Competition and Consumer Commission.

The ACCC said at the time that they had reasonable grounds to believe that Epharmacy made false or misleading representations that consumers would save money off the recommended retail price (RRP) for certain Healthy Care branded products purchased through the Chemist Warehouse, My Chemist, or Epharmacy websites.
In Australia, several retailers including JB Hi Fi and Harvey Norman change the price of goods daily a product starting the day at one price online can end up 30% cheaper by the end of the day as retailers compete for customers.

During an Amazon US study, Consumer Watchdog said it found at least half the list prices examined were greater than the prevailing market price.

“There’s no real transparency about what the heck they’re doing,” said John M. Simpson, privacy project director for Consumer Watchdog, which filed a petition this week in the USA calling on California Atty. Gen. Xavier Becerra to investigate Amazon. “At a minimum, there needs to be some clear understanding about how they’re coming up with these purported list prices.”

The practice has garnered widespread attention in recent years after several lawsuits against retailers.

It’s been revealed that Amazon was fined about $750,000 in January by Canada’s Competition Bureau for misleading savings claims. Amazon voluntarily changed its pricing practice in Canada prior to the bureau’s fine.

Bricks-and-mortar stores have also been accused of misleading pricing practices.

You may also like
Aus Needs Competitive Digital Ad Space: ACCC
Giant Retailers Pledge the Impossible 
Amazon Allows Knock-offs – Depending On Who Is Being Knocked Off
ACCC Seeks New Powers To Curb Tech Sector
Amazon Challenges $1.16 Billion Data-Protection Fine