Advocacy Group Consumer Watchdog Warns Consumers Not to Trust Amazon List Prices

Advocacy Group Consumer Watchdog Warns Consumers Not to Trust Amazon List Prices

List pricing practice may deceive customers about how much they really save on purchases

March 21, 2017

E-commerce giant Amazon is at it again, according to advocacy group Consumer Watchdog (CW).

The site was involved in several lawsuits over its list pricing practice, which consumers claimed deceived them about how much they really saved on items they bought through Amazon. As a result, the site seemed to have been phasing out the practice.

Now, however, a study commissioned by CW has found that the site still uses list pricing on at least 1,000 products. Out of 4,000 items the group examined in the study, more than one-fourth were affected by the practice.

Most online shoppers are familiar with list-pricing, though they may not know it. If you see a crossed-out price beside the current and less expensive price, the crossed-out price is the list price. The bigger the difference between the prices, the more likely consumers will want to buy the item, and Amazon knows it.

What most consumers don't know is how Amazon calculates the list price. List prices can be inflated for no apparent reason, which makes it seem like the discount is bigger than it really is. On its website, Amazon defines a list price as "the suggested retail price of a product as provided by a manufacturer, supplier or seller."

The e-commerce company stated that CW's report is misleading.

"Manufacturers, vendors and sellers provide list prices, but our customers care about how the price they are paying compares to other retailers," it 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."

Amazon also said that it has introduced a so-called "was" price that uses the item's recent price history on Amazon. According to the company, this gives customers "an alternative reference price when we don't display List Price."

CW claims that its study found at least one half of the list prices of the products examined to be more expensive than the prevailing market price.

"There's no real transparency about what the heck they're doing," said CW Privacy Project Director John M. Simpson. "At a minimum, there needs to be some clear understanding about how they're coming up with these purported list prices."

The advocacy group has petitioned California Attorney General Xavier Becerra to investigate Amazon.

Misleading pricing practices have not been limited to e-commerce companies. The Los Angeles City Attorney's Office sued brick-and-mortar stores JC Penney, Sears, Kohl's, and Macy's in December, accusing them of falsely advertising steep discounts.

Bonnie Patten is the executive director of Truth in Advertising, another consumer advocacy group that was not involved with CW's study.

"Unfortunately, this sales tactic or fictitious pricing actually works and retailers know that," she said. "It's not just Amazon."

State and federal law require all retailers to show reference prices reflecting how much products are usually sold for. These prices can be calculated in several ways, such as by examining the average prices for a particular product, the median price, or the price used most often for the purpose of comparison.