03/14/2014

If you're an Amazon Prime member, you probably know already that the annual cost of membership is going up to $99 the next time you renew.

Still, the argument goes, it's a good deal for frequent Amazon shoppers because, in addition to e-book lending and other free-with-subscription content, Amazon Prime gets you free shipping on all qualified purchases (as opposed to non-Prime Amazon, which only offers free shipping on certain items, and then only when your total purchase costs $35 or more).

But maybe Amazon Prime's “free” shipping isn't free at all. That is the allegation made by plaintiffs in two recent lawsuits against the company: that Amazon Prime members who got “free” shipping were actually charged higher base costs to cover it.

The first lawsuit was filed in February, by Amazon Prime member Marcia Burke of Alabama; the plaintiff in the second suit is A. Cemal Ekin of Rhode Island. Both of them make the same general complaint, a specific example of which is taken from Burke's suit:

"[I]f the price of an item is advertised for $10 with $3.99 shipping and the [vendor] wishes to match or top their price, the [vendor] would charge $13.99 or higher."

In other words, an ordinary customer buying that item and nothing else from Amazon would pay a total of $14: $10 for the item and $4 for shipping. In some cases – if the customer bought at least $35 worth of items at once, thus qualifying for free shipping – the total cost of the item would only be $10. Yet an Amazon Prime member, who paid $79 for “free” shipping this year, is charged a base price of $13.99 for the item no matter what.

Amazon has not commented on either suit, citing pending litigation.

Dynamic pricing

Oddly enough, the simple fact that Amazon charges different prices to different people for the same item might not, on its own, be sufficient evidence. The practice of charging different customers different prices for the same item is fairly common among online sellers — and perfectly legal in most instances. It's called “dynamic pricing,” and Amazon isn't the only company that does it.

In May 2012, the consumer blogger for The Oregonian, Portland's daily newspaper, noted that “Amazon's 'dynamic' prices get some static,” and described the experience of one customer buying a set of mahjongg tiles from Amazon:

"[A]fter sifting through several pages of options, [she] settled on a set for $54.99. She placed it in her virtual basket …. A few minutes later, she scanned the cart and noticed the $54.99 had jumped to $70.99. Plumlee thought she was going crazy. She checked her computer's viewing history and, indeed, the game's original price was listed at $54.99. Determined, she cleared out the cart and tried again …. That's when the game's price jumped from $54.99 to $59.99.... Although consumers say such price revisions feel like bait-and-switch, they're entirely legal. And Amazon's not alone. Not only do prices move up and down on a regular basis, but also they're often adjusted based on exactly which customer is mulling a purchase.

Nothing new there, especially not for Amazon. In 2005, CNN's law blog informed readers about the practice of dynamic pricing, and noted that Amazon got burned for it as early as 2000:

In September 2000, Amazon.com outraged some customers when its own price discrimination was revealed. One buyer reportedly deleted the cookies on his computer that identified him as a regular Amazon customer. The result? He watched the price of a DVD offered to him for sale drop from $26.24 to $22.74.

To cite a few non-Amazon examples at random: in 2012, the Wall Street Journal learned that travel site Orbitz charged higher prices to customers who visited their site with a Macintosh computer rather than a PC — the rationale being “Apple computers are more expensive than PCs, so Mac users are probably richer than PC users.” Thus, a Mac user looking for hotels on Orbitz would get offerings that cost up to 30 percent more than the offerings given a PC user.

Two years earlier, the Journal discovered that when computer users visited Capitol One's website, the bank read information stored in the computer's browser history to determine which credit card offer it made available.

Later that year, the Consumerist shared the story of a blogger who learned “Capital One made me different loan offers depending on which browser I used”; when he visited the website using Firefox, he was offered a much higher interest rate than with Chrome.

Shop around

So in Internet terms, “Shop around for the best price” might require more than merely comparing prices from different sellers' websites; you might also need to compare prices from different computers using different browsers in different cities whose differing IP addresses reflect different median regional incomes.

That said: the legality of “dynamic pricing” in general still doesn't necessarily mean that Amazon would be on firm legal ground in charging higher prices specifically to Amazon Prime members to offset their “free shipping” benefits, as the lawsuits allege, since the practice could be construed as deceptive advertising.

If you're an Amazon Prime member, it might be worthwhile to ask some non-Prime friends to run a price check from their computer on whatever Amazon items you yourself buy. (You can also do this from your own machine; just open an "incognito" window in Chrome and go into Amazon as a guest instead of logging into your account).

If you do discover such a price discrepancy — specifically, the same item from the same seller demanding a higher price from a Prime member — get screenshots of the two different prices, and promptly bring your complaints to Amazon's attention. (And if you're willing to share your story and screenshots with us, our readers would surely benefit to hear it.)