Amazon ‘ripping consumers off’ by tricking them into thinking they’re getting a deal: watchdog

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On Amazon, the $119.99 price for the sleek and snazzy Cuisinart SS-10 single-serve coffeemaker looks to be a real steal, compared to the crossed-out price of $270 beside it.

And it turns out that a customer buying the coffeemaker on Amazon would be getting a deal – but nothing like the savings suggested by the $270 reference price, it appears.  Cuisinart itself sells the item for $149, and it’s available for that price at Kohl’s and Williams Sonoma.

This reference-price issue — which cost Amazon a hefty fine in Canada earlier this year — forms the basis of a demand March 20 by a consumer affairs watchdog that California’s Attorney General investigate Amazon over “reference prices” the group claims are intended to deceive consumers.

“This reference price creates the impression that the consumer is getting a deal because the price paid is substantially lower (than) the one with the line through it,” Consumer Watchdog said in a press release. “The catch is that the product is actually widely available from many other outlets at prices much lower than the crossed-out reference price.

“Amazon and its executives are cynically flouting the law to increase sales and profits. It’s false advertising violating the California Business and Professional Code, as well as an unfair and deceptive practice violating the Federal Trade Commission Act.”

Added the group’s Privacy Project director John Simpson, “Amazon CEO Jeff Bezos is building the company’s business on lies and unfairly ripping consumers off.”

Amazon responded to a request for a response to the group’s allegations with a request for further information, which was provided by SiliconBeat; this article will be updated with any further response from Amazon.

Consumer Watchdog said that in the past, nearly every Amazon ad had reference prices, but an early-February study by a data researcher of more than 4,000 products still found them on more than a quarter of ads studied, the group said. “The majority of these crossed-out prices exceeded — sometimes by large margins — any plausible definition of the ‘prevailing market price,’” Consumer Watchdog said.

The group pointed out that Amazon was fined $1 million (Canadian – approximately US$750,000) in January in Canada over its use of the reference prices.

“At the heart of this case, it’s really about truth in advertising,” Josephine Palumbo of Canada’s Competition Bureau told The Star newspaper. “We know that savings claims are a powerful tool.”

Consumer Watchdog also noted that a California court in 2014 fined Amazon competitor Overstock $6.8 million for similar practices. Alameda County Superior Court ruled that Overstock.com displayed reference prices “based on the highest possible price in order to overstate the amount of savings consumers could get,” the Mercury News reported.

With the allegedly inflated reference prices, Amazon is breaking the law at two levels, Consumer Watchdog claimed.

“Under state and federal laws, reference prices displayed by retailers must reflect the recent prevailing market price. Federal regulations state that it is insufficient to display a manufacturer’s suggested price or to cherry-pick the highest competitor’s price in choosing a reference price,” the group said in its petition to Becerra. “Instead, a reference price must reflect the price at which a product is generally sold.”

The consumer group wants California Attorney General Xavier Becerra “to take immediate action to hold Amazon and its CEO Jeff Bezos accountable for this outrageous abuse,” it said in a petition sent to Becerra. Consumer Watchdog is also asking the Federal Trade Commission to investigate and take action on Amazon’s reference prices.

The Cuisinart coffee maker’s pricing and reference pricing on Amazon and elsewhere may shed some light on how Amazon arrives at the reference prices. While Kohl’s advertises a $179.99 “regular price” for the item it’s selling for $149.95, Williams Sonoma, also selling the appliance for $149.95, has a “suggested price” of $270, the same figure used by Amazon for a reference.

 

Photo: Boxes travel down a conveyor belt in Amazon’s warehouse in Tracy in 2016. (Doug Duran/Bay Area News Group)

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