FTC Reviewing Amazon Pricing Policy Following Watchdog Complaint

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The Federal Trade Commission is investigating allegations that online retailer Amazon (NASDAQ: AMZN) misleads customers about its prices and discounts.

The FTC action comes as part of a review of the Seattle, Washington-based company’s proposed merger with Whole Foods Market Inc. (NASDAQ: WFM), which Amazon offered to buy last month for $13.7 billion.

Consumer advocacy group Consumer Watchdog brought a complaint to the federal agency about Amazon’s pricing. The group said it analyzed 1,000 products on the Amazon website and said it found that 61% of the time, the reference or list price Amazon used to show consumers how much money they were saving rose in a 90-day period.

The warning was based on two studies released by Consumer Watchdog of Amazon’s  pricing practices.

Consumer Watchdog, based in Santa Monica, California, said Amazon can use such alleged manipulations of reference prices to make it look like consumers are getting a better deal than they actually are.

The nonprofit public interest group also asked antitrust authorities to block Amazon’s proposed purchase of Whole Foods “until the online retailing giant formally consents to halt its deceptive pricing practices that falsely lead consumers to believe they are getting deals with discounted prices.”

After the FTC reviewed the letter from Consumer Watchdog that was sent July 6, it reportedly began an informal inquiry into online retailer, according to Reuters.

Amazon told Reuters in a statement that the Consumer Watchdog study is “deeply flawed,” adding that “We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

It is unclear if the FTC will launch a formal probe into Amazon’s pricing structure.

Amazon rose $1.83 to $1,028.70 in Nasdaq Stock Market trading Thursday in New York but is trading down about 0.8% inf Friday’s premarket session at $1,021.01.