Watchdog: Amazon inflates discounts despite new strategy

‘Was’ price introduced amid legal challenges.

In a bid to promote its deals to consumers, Amazon.com Inc. started displaying current discounts compared to their historic price tags - a strategy that it calls the “was” price.

The “was” price was introduced as the e-commerce giant faced legal challenges and mounting criticism for allegedly exaggerating discounts through its previous pricing strategy, which was based on “list” prices derived from manufacturers, vendors and competitors.

But a fresh study by Consumer Watchdog alleges that “was” prices, along with “before-sale” prices and “list” prices, continue to deceive consumers into thinking that they’re getting a bigger bargain than they actually are.

The Santa Monica, Calif.based nonprofit consumer advocacy group looked at hundreds of products sold by Amazon in June and found nearly 4 in 10 listings displayed fictitious discounts.

The report comes more than three months after Consumer Watchdog filed a petition calling on California Attorney General Xavier Becerra to investigate Amazon after a separate study by the group alleged that the company was regularly using inflated “list” prices to give the appearance of larger savings.

The Consumer Watchdog recently filed another petition calling on the Federal Trade Commission and the Justice Department to look into Amazon’s scheme.

“The new reference prices seem to be just as bogus,” said John M. Simpson, privacy project director for Consumer Watchdog, which is urging the FTC to consider the study when it reviews Amazon’s $13.7 billion bid for Whole Foods Market.

Amazon dismissed the study, describing it as misleading.

“We are obsessed with maintaining customer trust, and work hard to provide meaningful reference prices. We use a variety of systems to validate reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers,” the company said in a prepared statement.

Amazon’s controversial “list” pricing has already sparked a class-action lawsuit, which is currently being heard at the U.S. 9th Circuit Court of Appeals in Pasadena, Calif. In January, the company was fined $750,000 by Canada’s Competition Bureau for misstating discount claims.

It’s not just Amazon that has gotten into trouble for inflating savings to consumers. Amazon rival Overstock was fined $6.8 million by a California judge in 2014 for misstating its discounts. In December, the Los Angeles city attorney’s office sued JC Penney, Sears, Kohl’s and Macy’s, accusing them of falsely advertising their sale prices.

In its latest study, Consumer Watchdog looked at 1,005 Amazon listings for common products like cameras and detergent and found 462, or 45 percent, had some form of reference price - an umbrella term for either a “list” price, “was” price, “before sale” price or a price crossed-out with a line, which the study refers to as a “strikethrough” price.

By comparison, Consumer Watchdog’s March report looked at 4,000 products and found that only 28 percent contained reference prices, suggesting that Amazon has been increasing its use of the advertising despite heightened criticism.

It’s unclear precisely how the different reference prices are determined and when and how they’re used.

“Amazon’s shifting approach to these prices suggests that the firm is seek- ing to reconcile increasing legal and public scrutiny with its continuing need to represent itself to consumers as a bargain retailer,” the study said.