Amazon Settles $2 Million ‘Reference Pricing’ Consumer Protection Suit

Online retail giant Amazon agreed to pay $2 million to settle a consumer protection lawsuit brought by a gaggle of California district attorneys who claimed it advertised false “reference prices” on its website.

In this Feb. 14, 2019 file photo, people stand in the lobby for Amazon offices in New York. (AP Photo/Mark Lennihan)

(CN) — A gaggle of California district attorneys were successful Thursday in forcing online retail giant Amazon to revise its “reference pricing” advertising alleged savings to consumers.

A week after San Diego County District Attorney Summer Stephan was joined by district attorneys for Alameda, Santa Clara, Santa Cruz, Riverside and Yolo counties in suing Amazon over its advertised “reference pricing” scheme, Amazon agreed to pay $2 million in penalties, costs and restitution to the state’s Consumer Protection Trust Fund and revise its listed prices so they are more transparent.

Amazon cooperated with the investigation and has already implemented changes to its website and pricing algorithms consistent with the settlement, according to the District Attorney’s Office.

“When consumers shop online, they need to be able to trust that when a product is advertised as being a bargain, it truly is,” Stephan said in a statement.

She added: “This judgment should remind retailers that the law requires them to provide accurate information so consumers can make informed purchasing decisions. Our Consumer Protection Unit continues to hold companies accountable and collaborate successfully with our prosecution partners across the state of California.”

The stipulated final judgment was entered by San Diego Superior Court Judge Katherine Bacal on Wednesday.

The agreement requires Amazon make changes and revisions to its “List” and “Was” pricing disclosures to explain the way it determines and validates its reference prices advertised on its website with a slash mark through the prices. Amazon must include a hyperlink to provide consumers clear definitions of “Was” and “List” price advertisements to explain the nature of the advertised savings.

Stephan and her district attorney colleagues had alleged Amazon insufficiently disclosed to consumers the methodology used in its “Was” and “List” prices, which were alleged higher former prices Amazon sold products.

Prices advertised as a “Was” price was the price at which Amazon previously offered the product, while “List” price advertisements were the suggested retail value of the product offered by other sellers or the product’s manufacturer.

But Stephan and other California DAs claimed Amazon had failed to follow its own pricing policy regarding its methodology for deriving its “reference pricing” including failing to include temporal constraints in determining the median price paid by customers listed as the “Was” price or disclosing “List” prices were not necessarily the prevailing market price of advertised products.

Amazon is represented by Gibson Dunn partner Christopher Chorba. Media requests for comment to Gibson Dunn were not immediately returned. A spokesperson for Amazon said, “Amazon has always provided clear and accurate pricing information on our product pages, and we have made improvements to how we describe the pricing information we provide to make it even clearer for customers.”

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