Amazon Under Fire from FTC

September 5th, 2017

Amazon’s pricing practices are coming under scrutiny by the US Federal Trade Commission (FTC).

The FTC is reviewing a report by US advocacy group Consumer Watchdog as part of its wider look at the e-commerce titan’s acquisition of Whole Foods.

In a survey of 1,000 products, it found that Amazon had put its own reference prices on 46% of them. But on 61% of these, the price was higher than what it had been 90 days earlier. Consumer Watchdog claimed that it misrepresented just how much of a discount was being offered to customers.

It highlighted that most consumers still expect Amazon to be the ‘best possible deal’ and given Prime member’s loyalty to the site, it stopped many from shopping around.

In addition, a separate report by industry analyst RetailDive on back-to-school buying habits found that those who shopped exclusively on Amazon were paying on average 15% more than those who went elsewhere. It seems to show that Amazon no longer needs to compete on price, relying more on loyalty and the quality of service, such as next-day or discounted delivery options.

The Consumer Watchdog claims that this was a misrepresentation of its pricing strategy and breached FTC regulations.

Amazon has publicly denounced the report, calling it “deeply flawed”.

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

It is unclear whether the report will lead to a formal probe by the FTC, but it could impact similar investigations by the ACCC in Australia ahead of Amazon’s direct-to-business launch in the region.

Deceptive pricing allegations certainly won’t work in Amazon’s favour with the Australian authority, when it starts looking into how the B2B debut would affect competition in an already heavily-consolidated market.

Meanwhile, if Amazon is found to have breached consumer protection regulations by the FTC, it could be faced with a hefty fine akin to the €2.4 billion penalty slapped on Google by the European Commission last month.

The study is another thorn in Amazon’s side following its proposed deal to buy Whole Foods last month. Since the $13.7 billion deal was announced, a group of US Congressmen have called on the Department of Justice to carry out an in-depth review. The representatives highlighted the knock-on effects for low-income communities that would arise from competition pressures.

Seattle (WA), USA


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