Lawsuit Alleges Amazon is Rigging Prices to Cover Shipping Costs
A group of consumers in Washington state are suing because sometimes the "free shipping" price Amazon offers to Prime members is more expensive than prices offered by 3rd-party sellers:
The argument is pretty straight forward. Amazon customers pay $79 a year for Amazon Prime, which gives members free two-day shipping on Prime-Eligible products. Amazon is being accused of encouraging vendors, who use Amazon to ship its items (referred to as Fulfillment by Amazon or FBA), of marking up the prices of these items to ultimately include shipping charges. Further, Amazon allegedly then gives these vendors priority by showing their items first in the Prime Member’s product search results.
By raising the price of the product, the lawsuit contends that Amazon is able to recoup the cost of shipping because it receives a percentage of the product’s price.
“The routine inclusion and encouragement of inclusion of shipping charges in the prices of FBA Prime-Eligible items constitutes a breach of Amazon’s promise to Prime Program Members that shipping charges would not be included in the prices of items offered for sale as FBA Prime-Eligible, and violates Amazon’s agreement that shipping would be ‘free’.”
Amazon recently increased the cost of a Prime membership to $99, and in exchange for that fee consumers are supposed to get free ebooks, free ebook loans, free streaming video, and reduced shipping costs including free 2-day shipping.
This blogger is willing to bet that this case is without merit. If there were merit then the lawsuit would have been filed years ago.
Washington state law says that a retailer can’t proclaim a free option and then simply bundle the cost into the retail price, and it is easy to see that this is not what Amazon is doing here. Amazon does not force Prime members to pay the prime price, nor do they block non-Prime members from paying that price. Prime members can pay the Prime price and get free 2-day shipping, and non-Prime members can also pay that price – and then pay extra for 2-day shipping (Thanks, Purple Lady!). In other words, the cost of shipping is not bundled.
On a related note, the state of Washington has already looked into this; they have anto investigate such issues. Fighting Deceptive Internet Sales Practices is listed as one of its main interests, but curiously enough Amazon is not listed as one of the companies sued or under investigation:
- ATT Mobility
- Direct TV
- Tattoo Media
Amazon has been offering Prime since 2006, and Amazon has continued to offer the membership program for all that time. If Amazon were breaking the law don’t you think the state of Washington (not to mention the 49 other states) would have sued Amazon in court by now and forced Amazon to change the way Prime works?
Admittedly, the website has not been updated in several years (there’s no mention of the ebook price-fixing lawsuit) but any case against Amazon would have run its course by now and made it into the news. Given that the ebook antitrust lawsuit was filed a little over 2 years after Apple negotiated a consumer-unfriendly contracts with the 5 publishers, I would think that the state of Washington could have sued Amazon by now – assuming Amazon was breaking the law.
I can’t find any news reports of Amazon being sued over this (aside from this one case), and I know that the retailer has been sued any number of times in Europe for violating their competition laws, including for acts as simple as offering free shipping on books sold in France and Germany (it was ruled an illegal discount).
Did I miss something?
If so, the comments are open.