Lawsuit alleges Amazon Prime third-party prices are inflated to cover shipping

Amazon is being accused of encouraging third-party sellers to inflate prices to help cover the cost of shipping, even though customers who pay for Amazon Prime, are supposed to get that benefit for free.

amazonprimeThe lawsuit comes at a time when Amazon is already considering raising the cost of the $79 program by $20-to-$40 a year to cover increased shipping expenses.

The complaint, which is seeking class action on behalf of Prime members between 2007 and 2011, was filed last week in U.S. District Court in Seattle on behalf of an individual Amazon Prime member.

Amazon did not immediately provide a comment on the suit in response to a GeekWire inquiry.

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’.”

The lawsuit is seeking a refund of all annual Prime Program membership fees; damages as provided under the Washington Consumer Protection Act; and attorney’s fees.

Free two-day shipping is the core offering of Amazon Prime, however, in recent years it has expanded much further to include a Netflix-like streaming video service and free book downloads on the Kindle. Any deception regarding the Prime program could potentially hurt Amazon’s reputation for offering low prices and free shipping.

  • Slaggggg

    I am a merchant and Amazon’s people are very aggressive about suggesting that FBA items be given higher prices because consumers are willing to pay more for the fast shipping experience. This definitely happens.
    Whether or not these people should earn a buck off it is a different question. But anyone who thinks “free” shipping is actually free is a rube.

    • http://www.google.com Computer Addict

      I dont think anyone thought it was “Free Shipping” … That’s why we pay $80/yr… I pre-paid my two day shipping, I shouldn’t have to pay again though inflated prices, If Amazon needs to charge $100 per year to make the program solvent so be it, but they shouldn’t be double dipping.

      • YES

        It is not Amazons fault that you click on the highest price of an item when there are lower prices to click on. Amazon is just taking advantage of those people who are lazy and do not take time to search. THE BUY BOX IS NEVER THE CHEAPEST!

    • Bobby Ricigliano

      Are you fucking retarded to think you can blame Amazon for you raising your own prices?

      • Slaggggg

        Yes, I am fucking retarded. You called it, bro. Well played.

  • http://www.intrinsicstrategy.com/ FrankCatalano

    Good timing. Yesterday, I was checking Amazon’s prices for two different Dirt Devil vacuum filters that are difficult to find in stores. Then I checked the official Dirt Devil site. The Amazon Prime-fulfilled sellers’ prices were consistently higher than non-Prime merchants as well as the manufacturer’s own website, usually by at least a dollar per filter and sometimes much more. Definitely not what I expected.

    • SoggyDog

      There are many Prime customers that only shop Anazon. They don’t bargain shop and don’t really care to. I price according to the market. Nobody has to pay what I charge. If they don’t then I re-price accordingly. Amazon has never openly suggested that I raise my price. If anything I get daily emails letting me know that my prices are not the lowest.

      • http://www.intrinsicstrategy.com/ FrankCatalano

        Understood. But there’s understandable market-based pricing and opportunistic pricing. Some Amazon-fulfilled merchants charge far more, 2x or 3x, what others do for the same item, apparently just hoping someone searching only for Prime shipping will click. I find that misleading and ethically suspect.

        • http://geekwire.com Tricia Duryee

          I think @SoggyDog is right…Amazon Prime customers don’t comparison shop. I think they are assuming that they are always getting the lowest price. That’s what Amazon is known for. But just like @FrankCatalano, I’ve been having the same experience. Often times, the Prime price is more expensive than shopping on Target or toysrus, which offers free shipping on certain orders. I’m often spending $50, so I get the free shipping and the better prices elsewhere. I guess I don’t get it in two days, but that hardly seems worth the mark-up (especially since I already pay for Prime).

          • Oni

            I beg to differ. I bargain shop all the time as a Prime member. I even go the extra step to tell Amazon there are places offering the same product at a lower price.

        • Bobby Ricigliano

          If people buy shit without looking at the price, that’s their own damn fault.

          • Linzy

            You are way too angry, and I have a feeling you don’t know as much as you’re acting like you do.

          • Linzy

            There’s a class-action lawsuit for a reason. Why don’t you people leave it up to the courts and stop speculating?

      • Leo

        If you look at ANY of the FBA guides or the FBA calculator, it explicitly states that if you use the same price as you do for seller-fulfilled and your profit is no longer enough due to the higher (FBA) fees, raise the price.

  • Bob

    I Am a fba merchant, amazon takes 20 to 25% of the selling price to cover shipping, handling, and profit. Can set my price anywhere, but if it is never the lowest it will never sell and I will pay amazon storage fees.

    • http://geekwire.com Tricia Duryee

      It would be great to speak to a merchant about this. Ping me at tricia@geekwire.com.

  • Shippa

    There’s no such thing as FREE anything, least of all shipping

  • Sue

    Completely bogus. Amazon gives the buy box to the lowest price in combination to closest location of item you want. Do people realize how much 2 day shipping would cost?

    • Beth Bloom

      Yeah, I don’t know what they are talking about. I set my prices to be competitive with trying to maintain a decent enough margin. Also, if a product is eligible for prime, we don’t get shipping reimbursement.

      • CharlesKGim

        “I don’t know what they are talking about”
        That’s pretty obvious.

      • Jah See

        Wouldn’t the problem be Prime itself, then? Why not just dump Prime vendor enrollment, or whatever it is they have the vendors agree to, to have their wares Prime-eligible?

    • Leo

      You’re completely wrong. Buy box is not exclusive to the price +location and there are hundreds if not thousands of examples in which this can be proven. A good example? I can look at own listings where I am lowest priced for self-fulfilled and FBA, I still don’t see myself with the buy box.

  • Nathan Grimm

    In my experience as a seller on Amazon, an FBA offer that is significantly more expensive than a merchant-fulfilled (MFN) offer will not win the buy box. An FBA offer that is very slightly more expensive than an MFN offer will share the buy box.

    Now, I doubt that this case will hinge on the specifics of the buy-box algorithm. It is more likely to come down to what seller support has been instructed to tell sellers. I.e. if seller support was instructed to tell sellers to increase their selling price to cover shipping costs I could see this case succeeding.

    • Michelle

      I am a Seller as well, Amazon has never told me what to price anything. If anything, they have suggested lowering the price. I have lost money selling Prime as well. There are good deals to be had. You just have to search for them. Amazon Prime is for convenience. Some people pay more to get what they want. That is true for any service or product.

      • http://geekwire.com Tricia Duryee

        If either of you would like to chat more about this, drop me a line at tricia@geekwire.com.

    • Heather Vaughan

      People do not seem to understand the prime fee also insures you are at the front of the line. You can get free shipping on lots of amazon items when you spend 35.00, but you may wait 3 or 4 days for it to ship because I image they compile orders that are not prime so when they drive the forklift over and get the pallet down they can pull for lots of orders not just 1 Which saves time and labor cost for the”handling” part of the shipping. So with prime the order comes in, guy hops on the forklift, zooms to shelf xyz, gets the pallet down, takes the item to the shipping department where it gets put in the ship today line. Without prime, your order comes in and sits for a couple if days while more orders come in for items on shelf xyz. When it has been 3 or 4 days or a minimum number of products are bought from shelf xyz, the forklift goes over and pulls all the orders, takes them to shipping where they are probably placed in a line based on what box needs to be used so the shipping people can do a bunch of one box size at a time.

      You are paying for a priority service as much as the ups blue or FedEx cost.

      Plus there are other benefits, like the kindle book downloads.

      I think this is a case of buyer’s remorse. No one says you have to pick the prime eligible items, but you can if you want to get it fast.

  • http://www.YourCableStore.com/ Nathan

    Amazon charges 3rd party merchants $2.42 to ship a single item ($1.00 per order, $1.00 per item, and $0.42 for the weight on one item under 1 pound, and this does not include the commission Amazon charges). You can call these fees shipping, fulfillment or whatever you want. However 3rd party sellers are independent businesses and have to account for all costs and set pricing accordingly if you don’t you will be out of business pretty quickly.

    • Michelle

      I have found when I merchant fulfill an item, many times I pay more for shipping than they charged the customer (when shipping to California from Florida, for example.) I have lost money many times and the customer got a deal.

  • Julie B.

    You know what the biggest problem is that amazon has. All of the Grovers that drop our of the daddy long legs. If they could stop that, then the curtled milk would roll over the sour balls freely. In other words, if you have 2 dollars you might as well have ordered the yummy buffing puffer. Thanks for listening :) How is your IQ score now?

  • Julie B.

    You know what the biggest problem is that amazon has? All of the Grovers that drop out of the daddy long legs. If they could stop that, then the curtled milk would roll over the sour balls freely. In other words, if you have 2 dollars you might as well have ordered the yummy buffing puffer. How is your IQ score now? :)

  • Richard Shepard

    This suit is such BS that I have to wonder what qualifications the lawyer has to file it in the first place. Amazon never tells ANY third party merchants how to price their products. At most, it tells all merchants who are listing new items what the current lowest prices are and lets the merchants decide for themselves how much to charge. And, it regularly tells its merchants via email when their product prices are no longer the lowest.

    • Bobby Ricigliano

      I personally know this law firm and what they do. Scumbag attorneys thinking up ideas for class actions against big companies in order to get the biggest paycheck. Unfortunately they abuse the law by asserting false interpretations of semantics that any dimwit could see through.

    • Jah See

      This debate statement would then make the issue less about the buyers, than it would be about vendors’ allegiance to Amazon [and Amazon's bottom line], if I’m understanding your point right. This would make it a business-’weathering’ [because *crushing* is an extreme word to use, this early in the allegations] issue. Aside from any of this, it will remain that convenience comes with a price, and that time [in going out to physically get the items vs doing other things with that time] is always worth more than money.

      • Richard Shepard

        I’m not sure of the point of the first part of this comment, but the second part — “convenience comes at a price” — is, IMHO, dispositive. There is nothing in the Prime contract that requires buyers to buy from third party sellers. Their contract is with Amazon and Amazon offers products at whatever price Amazon decides. And Prime buyers can then elect to buy from Amazon, or from somebody else. The fact that some of those sellers are also on the Amazon website is irrelevant. If Prime members are dissatisfied they have no obligation to renew.
        As an aside, I think Amazon’s recent decision to increase the cost of Prime membership is a clear indication that Amazon isn’t worried about the outcome of this suit.

  • DP

    I’ve noticed this trend as well being an Amazon merchant for the past few years. I both use FBA and self fulfill. A product I sell using FBA is priced at $27.99 and I also self fulfill for $23.00. + $4.99 shipping. Buy box always is set at $27.99, but I noticed that quite a few customers will purchase from me to self fulfill, especially if the are not Prime Members. Those who are not Prime members and purchase the FBA item at $27.99 also have to pay and additional $5.37 for shipping which is crazy because Amazon not only takes a cut from the FBA item, but also gouge the customer with shipping more than $4.99

    • Jah See

      Shipping is a sensitive issue with Amazon. As a buyer, I pay attention to the timing of the shipping. If I’m paying for a shipping time range, there’s an obligation to meet that shipping time range. Let’s just say I need more than five fingers to count how many times Amazon had to refund me shipping costs, in the last 180 days.

  • Wouldn’t Ya Know….

    What’s up with the recent rash of Amazon Prime items that don’t ship the same day. I almost bought the AmazonBasics mouse this week and as I was checking out I noticed at the last second, “Usually ships within 3 to 5 months.”. How can that be a Prime fulfilled item when it may not get to me until August?

    That was the third item in the last few weeks that was delayed shipping on a Prime item, although it is the most extreme example.

    • Julie B.

      You know butterscotch disks are not the best candy in world but either are cinnamon disks. The stuff that ships in 3-5 months is special ordered.

    • Bobby Ricigliano

      Some people appreciate options to buy things that may not currently be in stock, but will be in the future. But you can quit Prime if it bothers you that much.

    • Jah See

      Dude, that would be on you. Not on Prime membership.

  • J Hunt Morgan

    I just received an email from Amazon stating because of fuel etc the cost of my Prime membership is going up to $99.00 a year.

    • Jah See

      Quite a decision to make, to continue Prime. But it’s sad that not only is Amazon increasing the price on the buyer, it’s likely they’re raising the prices on the sellers.

  • http://www.wilmark.johnatty.com wilmark johnatty

    I find its amazing that this has come out now. I always suspected that Prime was a scam. I noted that when you look at “More buying options” there would be items cheaper BY the difference in shipping. And besides who really needs 2 day shipping. Protect the environment (less packaging and energy bills) and buy your items over $35 and get free shipping in a longer time. Amazon is pocketing the entire 79$ (well they give you some media stuff but seriously). Now because of our stupidity we are all on the bandwagon and buying Amazon’s BS. Go over to lifehacker and see how many of the sheep are saying that its still a great deal.

    • Jah See

      This seems to be a problem for sellers to cut-throat each other, and thus, themselves.

      Prime was actually good, once… that would be before UPS & FedEx gave everything to the US Postal Service to final-deliver. Then again, I $3.99′ed (one-day delivered) EVERYTHING, when I did have Prime; bulk-buying, as you would describe it (believe me, no difference in energy bills, except how soon they’re generated).

  • Jah See

    Considering Amazon Prime is a customer loyalty program (which would be indicative that Amazon hopes you either shop there primarily/exclusively, or treat Prime like a ‘casual’ gym membership [i.e.: Planet Fitness]), that Amazon is this unwilling to honor consumers’ trust under their own program would make Prime moot. (I cut Prime for different reasons – *cough*SurePostSmartPost*cough*, but this is certainly a deep betrayal against the buyers, no matter if the buyers are bargain shopping or not. It’s a LOYALTY program!)

    • Jah See

      Frankly, consumer loyalty & the associated programs are overrated. (You have Best Buy willing to undercut Amazon on all Amazon sold & shipped electronics, and related accessories, and they’re right at your doorstep! Who knows what other store chain is gearing for that plan?)

  • michael lau
  • Altopia

    What about us sellers that have been forced to use our sales proceeds to make up the difference on shipping items we sold when the fixed shipping credit Amazon provides is not sufficient to cover shipping costs? We are entitled to the money we got screwed out of too.

    • thornton8000

      That’s why I check to see roughly how much it costs to ship my item before I post it to sell, then I mark it accordingly to the market and also to adjust for shipping and amazon fee’s. So that way I can still come out ahead make a profit on everything I sell keep my customers happy. Amazon’s credit doesn’t cover half the shipping half the time and sometimes it covers most of it, just really depends on what your item is that you are selling at that time. You need to make sure you are not pricing off the lowest priced seller on amazon or you will never make any money ever. Amazon doesn’t tell you to raise or lower your prices, they will remind you that you are not the lowest priced seller of your item but they don’t tell you that “you need” to lower your price to stay on amazon to sell.
      I love buying and selling on Amazon and I don’t mind waiting 3-5 days to get my items Prime just is not worth it to me.

  • http://www.learnaboutinternetabuse.org/ Jeff

    I have been a prime member for several years. Amazon states “Free Two-day” shipping. Over the years I have noticed the increase of items that are “Prime” eligible. I DO research the price constantly, on other shopping sites, local stores (red laser is your friend) and never click the “Prime Eligible” box in a search. Often I will go to a local store, purchase and item and when I get home will see if I could have purchased it for less in Amazon. Recently I have been so shocked at the cost of Prime items that I have written Amazon twice. Of course I get the standard canned response of “Thank you.. blah blah.” One of my emails showed that a jar of peanut butter cost roughly $3.50 at a local store, Amazon had it listed in their Prime for $10. That of course is an outrageous price. Not only am I paying about $1.50 more for the product ($5), but then they charge $5 more to get the Prime 2 day shipping, plus I have already payed the $75 yearly Prime Membership. Simply put, if Amazon states “Free Two-day” then I think they need to reword their statement. I did not buy the peanut butter, I have stopped my Prime membership from renewing. This price increase was not always this way, a few years back you could get an item shipped to you for about the same price as you could buy it at a local store and in two days.

  • Santiago Draco

    Completely agree with this lawsuit and wish I could join it. I just now got off the phone with Amazon asking why their price for two items were 20% HIGHER than the manufacturers suggested retail price (MSRP!!!) That is insane. No one sells items for MORE than MSRP! Amazon you are heading down a slippery slope.

  • Meeetch

    So I just ordered a pair of sandals for my wife. One color of sandals was $32+$4.99 shipping, the other color was offered with Amazon Prime for $37.84 after tax from the same vendor. Sooooo why do I pay for Prime? I pay for prime so I can just think I’m getting free shipping when really it is just built into the price already.

  • cc

    This lawsuit is ridiculous. I am a pro merchant seller on Amazon, and I set my own prices. What a ludicrous lawsuit.

  • cc

    Furthermore, If you don’t like the price of an item; don’t buy it; simple. You don’t like prime; don’t subscribe to it. OMG what ignorance!!!!

  • M.

    Amazon cheats the sellers and the buyers! I sold on Amazon. When I saw that the shipping credit never covered the real cost of shipping, I complained to Amazon. They told me to raise my prices to cover the extra cost of shipping. Of course they would do that. Amazon can then get extra in the percentage to them! I complained about that on the forums and was laughed at by most other sellers, who knew all about it and said and did nothing. As for the A-Z policy, it forces returns, for any reason on a seller, hurting the seller. One of my buyers returned a book she damaged. damaged goods returned the seller must “eat” that loss. Amazon will ignore a sellers complaint of this nature, as they did mine, and charged me extra in the refund as Amazon stated my book did not live up to it’s expectations! I had pictures of the good in good condition and still Amazon “laughed” at me and hit me with return costs. Amazon seems to feel, in my opinion, that there are so many sellers, (which there are) why should they care about them, one down, hundreds left to take the place and for Amazon to take advantage of. Amazon should be sued as they are engaging in unfair business dealings. Not to mention if you speak your mind on the forums, you will be kicked off. Freedom of speech,,, not on Amazon.

    • Jeff Kay

      You think that’s bad? Amazon let a buyer return a Macbook Air I sold SIX MONTHS later! Who does that!? No reason was ever given to me for the return (and none would have been justified anyway, as it was warranted through Apple). My head just about exploded that day. Oh and they didn’t even charge him a restocking fee! Note to self: Buy a new laptop from Amazon every six months & then return it for a full refund! Unbelievable.

  • M.

    I too was a seller on Amazon. I never made money on shipping, in fact it ALWAYS cost me more to ship then I got credit for. Complaining to Amazon, only got me the answer I already knew… raise your price to cover! However when raising the cost of the item, Amazon then got a bigger commission, which ment a higher cost to the buyer. Not all sellers items could be sent by the prime, little sellers like me had a tough time, talking on the forums only got me kicked off the forms as I spoke my mind and Amazon did not like that at all.

    The fact is that Amazon is a big business that wants sellers and will do what ever it takes to make a buyer happy, or at least look like they are making the buyer happy. This time they got caught! I for one am happy as heck! I only wish that the rest of the sellers on Amazon would get together and force Amazon to get rid of the no returns policy on used items. Amazon has a A-Z policy on new items and that is stated on the site, but used items I don’t see a statement. Yet if a buyer doesn’t like any item it can send it back. I for one was one of the sellers that got back a good book, damaged by the buyer. I read on the forums this happens and there is nothing the seller can do about it.

    Amazon should have someone start an action against them for that alone.

    Thanks

  • M.

    Opps…. I ment to say…. “The fact is that Amazon wants buyers and will do what ever it takes to make a buyer happy….. (or at least look like that).. Amazon needs a real kick in the behind, and I hope they got it with this settlement and I hope there are more to come.

  • M.

    I didn’t realize I posted twice with the same complaint. I am sorry. I did not mean to annoy.

    However I did read more on the posts and wanted to comment on shipping in general.

    The shipping for a small seller at USPS is the same as for anyone, no discounts except those who choose to print out the labels at home.

    I sent a package that Amazon allowed $9.99 for shipping out to a lady in DC and it cost me $19.95. That same package might have cost Amazon to send it out $9.99 because they DO get discounts and there “pro” sellers get them too.

    The problem is that if a person wants a dish from a small seller and it costs them $5. but shipping is $6.95, they have to ask themselves just how much do they want that dish? On the other hand that same dish might be selling for $6. with only a $3.99 shipping by a pro seller. Where does that put me? I can not compete with a high volume seller. Or with Amazon who may sell the same dish.

    Shipping may be set by some of the pro sellers, but the bottom line is that shipping is really set by the major shippers. They are the ones making out.

    Prime is a prime example of a company trying to make out, maybe it worked for a while but not now.

    BTW.. what one of the posters said is true oft times you can buy local cheaper…. I put an order in on Amazon for Solar Lights at $7.95 each ordered 10, to get the no shipping cost, then held the order at bay. The next day I went to the Christmas Store in my area got the same lights for $4.99, purchased 10. Took them home and found they did not put out enough light for my use. Took them back, no problem. If I purchased from Amazon, I would have over paid, and would have had to pay to send everything back.

    Buying on line for items you can not find in a local store I think works for most folks, as it does for used or antiques or vintage items. I don’t think it works,,, anyway for me it does not, on new items.

    My best to you all.

  • Jeff Kay

    Not only that, half of what once shipped for free with Prime is now considered an ‘Add-On’ item! Prime is becoming an absolute JOKE.