PASADENA, Calif. (CN) – Critics have long charged that Amazon uses deceptive listings to mislead consumers into believing they are receiving steep discounts, and a California man on Wednesday asked the Ninth Circuit to overturn a ruling that sent his class action against the alleged practice to arbitration.
In a lawsuit filed in San Diego federal court in 2015, Allen Wiseley claims Amazon “cherry-picks” the highest marketplace price it can find “to create a significant price discrepancy and the impression of considerable savings for its customers” in violation of California’s false advertising laws. The reality is Amazon’s discounted prices are no different from those offered by its competition, including traditional brick and mortar stores, he says.
The controversial practice will be familiar to anyone who has visited Amazon online. The retailer displays a crossed-out list price in black type. Amazon’s price for the product is in red, and shoppers also see a dollar amount and percentage of savings.
U.S. District Judge Cynthia Bashant granted Amazon’s motion to compel arbitration of Wiseley’s claims under a provision that the internet retailer includes in its conditions of use and which is governed by Washington state law. Wiseley then appealed to the Ninth Circuit, which on Wednesday morning considered his motion to vacate Bashant’s order.
Wiseley’s attorney Trenton Kashima argued at the Richard H. Chambers Courthouse in Pasadena that the arbitration agreement was “unconscionable” under contract law and that California rather than Washington state law should apply.
“Under the assumption that California law applies, this particular arbitration clause would be indeed unenforceable,” he said, noting that California has “some of the strongest consumer protection laws on the books.”
Amazon’s attorney Jim Grant said that under either Washington state or California law, Wiseley’s claims must fail because he had accepted the conditions of use and arbitration agreement six times.
“Even if we assess this under California standards, all challenges that Mr. Wiseley raises do not establish unconscionability,” Grant said.
Consumer Watchdog said in March that despite legal challenges, Amazon still uses the pricing model. A study of the online retailer’s website found more than a quarter of Amazon stock included crossed-out prices, and that 40 percent of those were greater than those typically offered by its competitors.
“Overall, Consumer Watchdog’s findings suggest that Amazon continues to flout Federal Trade Commission regulations on deceptive pricing, as well as laws in many states where it does business,” the group said in an Aug. 24 statement.
After Amazon announced the purchase of Whole Foods for $14 billion, Consumer Watchdog called on 11 state attorneys general to take action to stop the pricing practice.
On its website, Amazon says it regularly checks list prices against those found on Amazon.com and from its competitors.
“Manufacturers, vendors and sellers provide list prices, but our customers care about how the price they are paying compares to other retailers,” the company said in a March statement. “We validate list prices against actual prices recently found across Amazon and other retailers, and we eliminate List Price when we believe it isn’t relevant to our customers.”
Circuit Judges William Fletcher and Sandra Ikuta and U.S. District Senior Judge Sarah Barker, sitting by designation from the Southern District of Indiana, took the case under advisement.