Alleged Amazon Price Fraud Seen Unlikely to Stop Whole Foods Bid

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By Alexei Alexis

Claims that Amazon.com Inc. has deceived customers about discount prices aren’t likely to derail the company’s planned acquisition of Whole Foods Market Inc., antitrust analysts told Bloomberg BNA.

The Federal Trade Commission is under pressure from groups such as California-based Consumer Watchdog to closely scrutinize the $13.7 billion Amazon-Whole Foods deal because of Amazon’s market impact. But given how U.S. antitrust analysis typically works, claims of price deception or other consumer violations are separate from the merger’s impact on the market. That could mean that the FTC would punish Amazon for some type of consumer violation but still approve the Whole Foods purchase.

A Consumer Watchdog complaint filed with the FTC on July 6 says Amazon has for years been using inflated general market prices to trick customers into thinking that they’re getting a deal on Amazon products. The complaint urges the agency to block the Whole Foods deal unless Amazon formally consents to “stop its deceptive, unfair and anticompetitive pricing.”

The FTC is looking at the Consumer Watchdog complaint as part of the merger review, according to Reuters.

Separately, the United Food and Commercial Workers International Union made public July 21 a letter from 12 congressional Democrats to the FTC and the Justice Department expressing concern that the Amazon-Whole Foods merger could adversely impact African-American communities that don’t have access to fresh fruit, vegetables, and other healthy foods.

The lawmakers’ request that regulators examine the merger’s impact on “food deserts” shows the wide potential reach that people are attributing to the proposed tie-up.

Different Law

But when it comes to claims of deceptive prices, they’re unrelated to merger review. “This issue will have no effect on the merger review, because the nature of the problem is derived from different law,” Roger Noll, a Stanford University professor of economics, told Bloomberg BNA. “Whether Amazon violated consumer fraud law is unrelated to whether the acquisition of Whole Foods substantially reduces competition.”

FTC spokeswoman Betsy Lordan declined to comment on whether the agency is reviewing Amazon’s pricing practices. “As a matter of policy, the FTC does not confirm the existence of investigations, or comment on them,” she told Bloomberg BNA.

An Amazon spokeswoman said that Consumer Watchdog’s claims are “deeply flawed, based on incomplete data and improper assumptions.”

“We validate the reference prices provided by manufacturers, vendors, and sellers against actual prices recently found across Amazon and other retailers,” she said in an email.

Different Bureaus

Consumer Watchdog’s complaint against Amazon comes under the purview of the FTC’s consumer protection bureau, which could address the issue on a separate track from the Whole Foods merger, according to Herbert Hovenkamp, a professor of legal studies and business ethics at the University of Pennsylvania.

The merger review takes place in the FTC’s competition bureau.

“If there has been any false or misleading behavior, the consumer protection bureau has the authority to issue a cease and desist order to prevent the firm from doing that sort of thing,” Hovenkamp told Bloomberg BNA. “But it would not ordinarily bleed into a merger inquiry in the competition bureau.”

It’s hypothetically possible to have two separate inquiries into Amazon, even though price information relevant to both analyses is being fed to the same agency, and there may be overlap among staff, Noll added. “To assign both tasks to the same people does not mean that the two cases overlap legally,” he said.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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