Report: Amazon Still Promoting Phony Discounts

For years, Amazon has often used the “manufacturer’s suggested list price (MSRP)” as a reference price for many products to be able to claim that Amazon’s current selling price would save shoppers a huge sum of money. Savvy consumers know that very few items ever sell at full MSRP, so any savings claimed compared to that number are likely to be fictitious. We have previously shown you crazy examples where Amazon even used inflated reference prices to facilitate their 80% and 90% off claimed discounts in some cases.

Almost exactly a year ago, we reported that Amazon apparently had discovered consumer religion and was dropping many of its phony comparisons to list prices. The change was likely a result of several lawsuits about their deceptive pricing practices.

More recently, Consumer Watchdog, a California advocacy group, noticed that Amazon was now advertising discounts from “was” prices (such as “Was $49.99” “Now 39.99” “Save 20%”). Sometimes the comparison just showed a price with a line through it, without explanation of what that comparative price actually represented.

So, like any good consumer group, they decided to conduct a survey. In June, they checked 1,005 items to see if Amazon’s new way of making price comparisons was less deceptive than the old way. They used a website called The Tractor, which maintains price histories for items sold by Amazon. In this way, they could see if the claimed “was” price was ever really charged by Amazon. See their full report.

The key findings included:

  • Amazon displayed reference prices on 46 percent of the products surveyed.
  • 61 percent of all reference prices were higher than any observed price charged by Amazon in the recent past (defined as 90 days).
  • In nearly four in ten cases, Amazon never appeared to charge the previous price from which it claimed to be discounting. It was entirely fictitious.
  • 83 percent of crossed-out prices on sale items exceeded the highest historical price in Tractor’s records. On average, they were double the highest price Amazon had charged previously.
  • Here are some specific examples from their study:

    *MOUSE PRINT:

    Hammermill paper

    According to the study, you really were not saving almost 50% on this paper. Rather than $17.78 being the regular price for this paper at Amazon just prior to the sale as some might believe, there were only four periods lasting no longer than a day or two when that was the actual price in the past year at Amazon. Neat trick, huh? As a matter of law in Massachusetts, for example, advertising regulations require that an item be offered at regular price for 14 consecutive days first before it is discounted. And then it needs to be at full regular price for about 36% of the time if the seller is going to continue to make a comparison to the “regular” price. (There are other rules that can apply here too.)

    *MOUSE PRINT:

    Amazon leather bag

    There was only six months-worth of price history on this item, but during that time, the most that Amazon charged was $26 — nowhere near the crossed out price of $149.99.

    Federal Trade Commission guidelines state:

    “If the former price is the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison…. If, on the other hand, the former price being advertised is not bona fide but fictitious – for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction – the “bargain” being advertised is a false one…”

    It is sad that a seller like Amazon, with its tens of millions of customers, seemingly continues to resort to using these deceptive pricing practices.

    Comcast’s Inside Wiring Plan Excludes Most Inside Wiring!

    One of the ways that telephone and cable companies try to make extra money is to pitch inside wiring plans to their customers. For about $5 a month, these plans typically promise to fix the cable or telephone wire in your home or apartment should it cause a problem with your service. Normally this would be the owner’s responsibility. Most consumer advocates say not to fall for the scare tactics and save your money because inside wiring rarely goes bad on its own.

    Last week, the Washington state attorney general went one step further. He sued Comcast, a large purveyor of these inside wiring plans because of alleged deceptive tactics they used to sell these policies. The lawsuit accuses Comcast of misleading 500,000 Washington consumers and deceiving them into paying at least $73 million in subscription fees over the last five years for a near-worthless protection plan without clearly disclosing its significant limitations.

    *MOUSE PRINT:

    Here is how Comcast promoted its plan before the Washington AG began investigating. (Here is how the plan it is currently presented.)

    It says in part:

    “Comcast offers a comprehensive Service Protection Plan (SPP), eliminating any concerns about being charged additional fees for service calls related to inside wiring. … Hassle-free replacement and repair of defective customer inside wiring.”

    When one checked the fine print terms and conditions of the Service Protection Plan as originally promoted, the introductory paragraph even reiterates the promise:

    “Inside wiring covered under this plan is owned by the customer or a third party and is defined as wiring that begins at the Demarcation Point, which begins 12 inches outside the customers residence and extends to the individual phone jacks, cable and Internet outlets and extensions in the home.”

    Digging deeper into the terms however, reveals the truth (emphasis added below).

    *MOUSE PRINT:

    Comcast fine print

    Maybe 90% of the wiring inside a home is behind walls, and it is excluded! Thanks for nothing, Comcast.

    Things get worse, according to the WA-AG’s complaint.

    [While] Comcast claimed the SPP covers all service calls related to customer-owned equipment, it does not cover any actual repairs relating to customer equipment. It simply covers the technician visiting the customer’s house and declaring that the customer’s equipment is broken.

    Comcast also marketed the SPP as covering service calls relating to Comcast equipment and wiring outside a customer’s house. However, these issues are already covered for free by Comcast’s Customer Guarantee promises.

    The Washington AG is seeking $100+ million in his lawsuit.

    For its part, Comcast issued the following statement:

    The Service Protection Plan has given those Washington consumers who chose to purchase it great value by completely covering over 99 percent of their repair calls. We worked with the Attorney Generals office to address every issue they raised, and we made several improvements based on their input.”

    Incidentally, it is believed that Comcast marketed its service protection plan the very same way nationally… so you probably have not heard the end of this yet.

    Amazon Finally Drops Deceptive List Price Comparisons

    For two decades, Amazon.com has compared its current selling price to an often illusory “list price” — a price often set by the manufacturer that few if any retailers actually charge. This comparison made consumers believe they were getting a great deal and saving a bundle. We have shown you in the past how often grossly exaggerated list prices at Amazon made a bad problem worse.

    More recently, on April 1 this year, Amazon advertised a memory module claiming a whopping 65% savings.

    Amazon comparison

    *MOUSE PRINT:

    According to CamelCamelCamel which tracks Amazon’s prices, Amazon never charged that list price of the memory module. And it has been two years since prices for that item even approached the list price.

    price history

    The New York Times now reports that Amazon has finally had a change of heart, and is dropping list price comparison for as much as 70% of their inventory. Here for example is that same memory module as of last week, with no savings claims made.

    Amazon's price today

    Why is Amazon dropping list price comparisons? Many retailers have been the subject of recent class action lawsuits alleging that customers were deceived by these false price comparisons, and they have been awarded millions of dollars. The question is will Amazon’s sales be affected because there are no savings claims? Remember what happened to J.C. Penney when their new president decided to play it straight and drop phony sales? Their revenue plummeted.