As the FTC investigates Amazon’s pending purchase of Whole Foods for antitrust violations, advocacy group Consumer Watchdog has lodged charges that the eCommerce giant has been misrepresenting list prices so as to make discounts look larger, Diane Bartz of Reuters reports. The FTC, which investigates deceptive advertising as well as antitrust compliance, has yet to launch a full investigation into the allegations, but has made formal inquiries into the matter.

Consumer Watchdog examined 1,000 listings on amazon.com, and found list prices (also known as “reference prices”) on less than half of them. Moreover, 61% of the reference prices that were listed were higher than prices at which Amazon had sold a given product in the previous 90 days.

Bartz reports that Amazon has called Consumer Watchdog’s study “deeply flawed” (Amazon’s words). She offers the following quote from a statement the company supposedly issued:

“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.”

In March, David Pierson of The LA Times quoted Amazon’s website as saying that “list price means the suggested retail price of a product as provided by a manufacturer, supplier or seller.” But, the company does not provide detail as to how it determines list price.

Consumers use list prices to judge the value they are getting on an item. The greater the difference between the list price and the price at which a store is offering an item, the better the deal. So, companies stand to gain from inflating the list price. Bartz, however, points out language in the FTC’s “Guide Against deceptive pricing that warns against the practice.

Consumer Watchdog conducted a similar study in March across 4,000 Amazon products, and claimed that “at least half of the list prices examined were greater than the prevailing market price,” Pearson said. Following that study, the group filed a petition urging California Attorney General Xavier Becerra to launch an investigation.

Canada’s Competition Bureau fined Amazon Canada C$1 million (approximately $750,000) for deceptive pricing on amazon.ca. As part of the settlement, Amazon “made changes to the way it advertises list prices on its Canadian website,” Hollie Shaw of The Financial Post reports.

Shaw cites the Bureau as saying that the settlement “resolves its concerns.” There is no indication, however, that Amazon made similar amendments to the manner in which it displays prices on its US site.

The FTC came down on Amazon in 2016 over $84 million worth of in-game purchases made by children without parental consent. When Amazon first released its app store, which comes standard with devices like the Kindle Fire, the software did not require password authorization for in-game purchases, so children could make such purchases on their parents’ accounts.

In March 2012, amidst a barrage of complaints, Amazon updated the system to require passwords, but only on purchases over $20. Then, in 2013, Amazon began asking for passwords even on purchases below $20, but left a 20-minute window between transactions during which passwords were not required.

The FTC said the purchasing system was not one hundred percent fair to adult consumers until July 2014. Amazon initially pursued a lengthy appeals process, but in April 2017 it agreed to drop the appeal and refund parents for the unauthorized charges.

As for the price deception allegations, Consumer Watchdog has asked the FCC to delay Amazon’s acquisition of Whole Foods until list prices are represented accurately. But, Erin Fuchs of Yahoo! Finance cites antitrust expert Herbert Hovencamp as saying that even if the FTC finds substance in the price-deception allegations, it would have no grounds on which to impede the Whole Foods deal, because misrepresentation of price poses no antitrust threat.

“Normally, we don’t think about deceptive pricing as a sign of market power and indeed if you look at the people who do it, they’re not monopolists,” Hovenkamp said.

Featured image via Flickr/Global Panorama