[Reuters] Amazon steers consumers to higher-priced items, lawsuit claims

News for Ecomm Sellers
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https://www.reuters.com/technology/amazon-steers-consumers-higher-priced-items-lawsuit-claims-2024-02-09/

Feb 9 (Reuters) - Amazon.com (AMZN.O) was sued in a proposed U.S. class action accusing the online retailer of violating a consumer protection law by steering hundreds of millions of shoppers to higher-priced items in order to earn extra fees.

According to a complaint filed on Thursday in federal court in Seattle, Amazon’s algorithm for choosing what to display in its “Buy Box” when shoppers search for products often obscures lower-priced options with faster delivery times.

Citing the recent antitrust case against Amazon by the U.S. Federal Trade Commission and 17 states, the complaint said shoppers go with Amazon’s choices nearly 98% of the time by clicking its “Buy Now” or “Add to Cart” buttons, often falsely believing Amazon had found the best prices.

Amazon allegedly created the algorithm to benefit third-party sellers that participate in its Fulfillment By Amazon program and pay “hefty fees” for inventory storage, packing and shipping, returns and other services, the lawsuit said.

“While ostensibly identifying the selection that consumers would make if they considered all the available offers, Amazon’s Buy Box algorithm deceptively favors Amazon’s own profits over consumer well-being,” the complaint said.
Amazon declined to comment.

The complaint was filed by California residents Jeffrey Taylor and Robert Selway.
It seeks damages for Amazon’s alleged violations since 2016 of a Washington state law against deceptive trade practices, which resulted in a “great burden placed upon its customers,” according to the plaintiffs’ lawyer Steve Berman.

The case differs from other private litigation over the “Buy Box” by focusing on harm to consumers from deceptive practices, instead of antitrust violations or harm to sellers that do not join Amazon’s fulfillment program.

The case is Taylor et al v Amazon.com Inc, U.S. District Court, Western District of Washington, No. 24-00169.

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It was only a matter of time until someone figured out which was the correct approach for Amazon’s quiddity in this regard, which has been fairly obvious to some observers ever since the 11Mar`19 removal of the “S-4 Parity with Your Sales Channels.” clause of the ASBSA.

There’s blood in the water, and the sharks are circling…

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Hmm, I’m not sure if this part is true though. Usually it’s favoring higher priced FBA offers (which have faster delivery) over lower priced FBM offers with slower delivery. Which is a valid thing to do because next day / 2 day delivery has some value.

It also favors listings with more reviews/BSR that may be higher priced, which is also a valid thing to do, because if it’s a product with many satisfied customers, it’s likely to be a good value.

Now, ASV has pointed out a theory that the Amazon choice badge is based partly on ad spend. If that’s the case that’s deceptive advertising.

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Correction - almost completely based upon ad spend. I spend nothing on ads except during the 'season" for my very seasonal product, yet it still sells at a steady lower rate in the “off season”. I have a “competitor” who makes a cheap knock-off of my product, and does perhaps 10% of what I do in the USA and on Amazon, but he can get “Amazon’s Choice” for my BRAND-REGISTERED TRADEMARK as a search term if he pays enough.

The upshot is that Amazon expects me to “bid” on my own TRADEMARK as an ad keyword, which is essentially extortion, and a clear violation of my trademark rights by Amazon, one that they have ducked in court with their various “we are just a platform” excuses.

I don’t really care, but it is annoying.

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Well, that certainly sounds like deceptive advertising, assuming that it can be proven in some way.

As for someone bidding on your trademark for sponsored ads, I don’t think that trademark protection extends to that (at least, I haven’t heard of any major lawsuit involving that yet). And yes, you’re right, they’re extorting you to bid on your own trademark. I read an article related to this, and essentially the strategy is to bid a low amount on your own trademark, just so your competitors can’t bid on it for free. Typically if someone’s searching for your brand name, they’ve already decided to buy your product. So the conversion rate for bids on that keyword is fairly low. This means if they’re paying any substantial cost for those ads it’s going to be a net loser. So what brands do is they’ll bid say, 50 cents on their own brand keywords if the category’s keywords average is $2. What you don’t want is people bidding 2 cents on your brand and getting the exposure because they’re competing against nobody. At a crappy conversion rate, 2 cents is still a great deal, 50 cents, maybe not so much.

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How’s anyone ever going to prove it? It falls into this bucket that my SAS manger likes to quote regularly. My response below :arrow_heading_down:

I guess THIS is our problem - “other criteria that Amazon is unable to disclose” We will continue to check daily for eligibility. Any other feedback would be greatly appreciated.*

We can’t run Best Deals on our top seller that moves many thousands of units a month yet our Chinese competitor with the fake reviews and others can run a deal on listings doing 400-1000 units a month. Explain that to me. The PRIMARY requirement for Best Deals used to be big volume movers. Now who knows what it is. Who You Know? Pay to Play? Combo of both? Yea

We used to be able to run Best Deals (Limited Time Deals), every 4 weeks without issue. Now all we can run is lightning deals. Yea, I’ll pass on that trash.

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I looked this up in my Funk & Wagnalls (yes it is here in the office on the shelf) …
Def. Law firms making money…

We must be one in a million, it cost us less to have Amazon pick, pack and ship our orders than we pay for shipping when we (FBus) FBA. It cost less for “full service” on 90% of our FBA items. Now the “other” fees, and handling of returns, customer management, etc. they stink.

:thinking: Interesting, here is a data point, we eliminated 95% of our ads, we used to get the Amazon Choice badge quite a bit. Have not seen it since!

For others reading along, yes our sales are down, but our profits are up after stopping advertising. I just got tired of the fraud. Happy Chinese New Year to all, notice your clicks are down? The Click Farms are on holiday.

I rest my case.

Since this is a Class Action, I get 99 cents on the dollar, you all get 1 cent.

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For the most part this is true, class action lawsuits are just a scam to make law firms money. Sometimes you get a class action that results in an actual change in the company’s behavior, but many times they’re just settled and nothing changes.

In this case, Amazon will likely not give up any discovery and will just settle and continue doing as they were doing. And the law firm will accept because they have no interest in anything other than getting a paycheck.

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4 posts were split to a new topic: Bidding on my own trademark

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Oooh! oooh!, I KNOW this one!
Refusal to disclose in discovery leads to sanctions, including the court assigning “adverse inference” to the entire issue addressed by the withheld discovery. This happened in a case I was involved in - the defendant played dumb, and claimed that there “were no backups”, an impossibility in these days of storage so cheap, discs are simply unplugged after a year of service, and warehoused, with their entire disc images intact.
The contractor that handled these things was deposed, and admitted to a relationship with Iron Mountain, who stores records and data, and admitted that “everything” had been backed up for more than a decade, all of it at Iron Mountain.
That deposition cost defendants several million, as the Judge ruled that every point that could have been verified by computer records extending back to the start of the statute of limitations was to be “presumed in plaintiff’s favor”.
Nice payday for Mr. Plaintiff. That would be me.

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IMO the most interesting aspects of this suit and the others is just how much information on algorithms will Amazon disclose, and what arguments will ensue about what should be disclosed.

Disclosure of the algorithms will likely make selling on Amazon impossible for many sellers.

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The Amazon Choice badge is a measure of popularity of the product, if advertising works, it must be based, in part, on ad spending. If Amazon ads draw no buyers, then there would be no association with ad spending, unless it is rigged. In my experience, Amazon Choice Badges are associated with good sales ranks and high numbers of reviews.

I guess I cannot see how this would be evidence of anti-trust violations by Amazon.

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The badge is absolutely rigged.

Right now we lost it to a 1P Amazon listing that is more than twice the price, longer to home, and has thousands less reviews.

The formula is supposed to be:

Best Price
Fastest to home
5 star rating avg
conversion

Our listing is half the price per serving than any other similar offer
Our listing is next day / same day everywhere that’s possible with 16K units at FBA
Our 5 Star Avg is higher than any other listing with 5000 or more ratings / reviews
Our listing converts at 75% organically and 49% with PPC

Yet an Amazon 1P listing was handed the badge a few days ago cutting our sales of that listing by 35% just like that.

And yes, I’ve been told by every SAS manager that I have had (3 at this point) that advertising spend opens up doors. Pay to play.

Amazon is as corrupt as the bulk of the sellers on the marketplace.

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It could be true, but we all also know that Amazon employees also provide wrong information.

The site is definitely biased in many ways to sold and shipped by Amazon listings, and the temptation is great to blame every Amazon advantage on that prejudice.

If discovery discloses the algorithms we might know what the truth is.

I have no doubt that some Amazon employees are as crooked as many of the Amazon sellers. Amazon’s metrics are amoral, they do not care how they are met.

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