California Counties Sue Amazon Over ‘Reference Pricing’

People stand in the lobby of Amazon offices in New York in 2019. (AP Photo/Mark Lennihan)

(CN) — A group of California district attorneys filed a lawsuit on Thursday against Amazon, accusing the online retail giant of misleading customers with its pricing.

District attorneys from six counties, including San Diego, Santa Clara and Alameda say Amazon falsely advertised prices to consumers through the practice of “reference pricing” in a lawsuit filed in San Diego Superior Court.

“That is, the price for which a product is advertised by Defendant for purchase is compared to a higher former price at which the product was sold by Defendant previously, often termed a ‘Was’ price, or is compared to a higher price, often termed a ‘List’ price, that suggests to a consumer the price at which the product is regularly sold by another seller, supplier or the product’s manufacturer,” the complaint states.

Amazon lists several products on its website with an accompanying “list price” or “was price” that displays a higher price than the current sell price, but a link below the advertisement takes customers to an explanation of their policy.

“The List Price is the suggested retail price of a product as provided by a manufacturer, supplier, or seller,” the website states. “Amazon will only display a List Price if the product was purchased by customers on Amazon or offered by other retailers at or above the List Price in the past 90 days. List prices may not necessarily reflect the prevailing market price of a product.

“The Was Price is determined using the 30-day median price paid by customers for the product on Amazon. We exclude prices paid by customers for the product during a limited time deal.”

The district attorneys said Amazon’s policy was not carried out.

“In the case of some advertised reference prices that referred to a former price at which a product was available for sale by Defendant, there were insufficient temporal constraints and/or number of sales to support the reference price as a former price, and there was insufficient disclosure to the consumer of the methodology used to derive the former price,” the complaint states.

In cases where some advertised reference prices suggested a price point set by other retailers or sellers, the plaintiffs say Amazon “insufficiently disclosed that the reference price was not necessarily the prevailing market price or regular retail price for which the product could be purchased.”

The DAs seek an injunction to stop “any misleading and/or deceptive statements,” as well as restitution and legal costs.

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