FTC probing allegation of Amazon’s deceptive pricing strategy

Advocacy group, Consumer Watchdog has alleged that Amazon’s deceptive pricing strategy is making the prices of its products look like a bargain. It has asked the FTC to stop Amazon’s acquisition of Whole Foods while its deceptive discount continues.

According to a source, the Federal Trade Commission is looking into allegation that Amazon is misleading customers on its pricing discounts. This review is part of Amazon’s decision to acquire Whole Foods.

The FTC is looking into a complaint by the Consumer Watchdog, an advocacy group, which looked into some 1,000 products on Amazon’s website in June and found that 46% of them had reference prices or list prices.

In a letter to the FTC, the Consumer Watchdog made an analysis which found that 61% of Amazon’s products had reference prices which were higher than the prices of the same products it had sold in the previous 90 days.

As per a source who spoke on the condition of anonymity in order to preserve business relationships, following the receipt of the letter the FTC made informal inquiries about these allegations.

It is yet to be known whether the agency will open a formal probe into the matter.

In a statement, Amazon termed the Consumer Watchdog’s analysis has “deeply flawed.”

“The conclusions the Consumer Watchdog group reached are flat out wrong,” said Amazon. “We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

The review of Amazon’s discount pricing is a potential indication that the FTC is seriously taking a look at Amazon’s agreement to acquire Whole Foods, a deal that could give Amazon an unfair advantage, says critics.

In its “Guide Against Deceptive Pricing”, the FTC has warned against using a “fictitious” or “inflated” prices for the purpose of making the price charged for a product look like a bargain.

In January, Amazon settled a similar allegations with Canada’s Competition Bureau in which it paid a fine of $756,658.60 (C$1 million) as part of the settlement.

Similarly, in 2014, Amazon had run afoul of FTC’s rules when it made too easy for children to run up big bills while playing games such as “Pet Shop Story” and “Ice Age Village” on mobile devices, resulting in an estimated $86 million of unauthorized charges.

The e-commerce giant has been ordered to reimburse parents for the charges.

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Categories: Creativity, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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