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Online Shopping: When Deals And Discounts Are Anything But

There is trouble brewing for online shoppers. Deals or discounts are often compared to list prices or manufacturer's suggested retail price (MSRP). The problem: nobody sells online at list price, so the discounts promised to consumers aren't really discounts. In other words, you're not saving money as promised.

According to The New York Times:

"... one recent example of how retailers use list prices to motivate online buyers: Le Creuset’s iron-handle skillet, 11 ¾ inches wide and cherry in color. Amazon said late last week that it would knock $60 off the $260 list price to sell the skillet for $200. Sounds like a bargain... Check around, though. The suggested price for the skillet at Williams-Sonoma.com is $285, but customers can buy it for $200. At AllModern.com, the list price is $250 but its sale price is $200. At CutleryandMore.com, the list price is $285 and the sale price is $200. An additional 15 or so online retailers — some hosted by Amazon, others on Google Shopping — charge $200. On Le Creuset’s own site, it sells the pan for $200."

So, that great "deal" you got shopping online may not be one. This is a huge problem:

"If you’re selling $15 pens for $7.50, but just about everybody else is also selling the pens for $7.50, then saying the list price is $15 is a lie,” said David C. Vladeck, the former director of the F.T.C.’s Bureau of Consumer Protection. "And if you’re doing this frequently, it’s a serious problem."

I agree. It sounds like list-price-abuse is worthy of an investigation by the U.S. Federal Trade Commission (FTC). Shopping online is getting trickier. Many consumers avoid retailers that have had repeated data breaches. In 2014, researchers found that some e-commerce sites performed price discrimination and steering.

What are your opinions? What do you do before purchase to ensure that the online deals you get are truly deals?

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Chanson de Roland

In addition to the problem of consumer fraud, i.e., lying that there is a list price in the market, when, in fact, there isn't, or lying about what that list price is, there is another problem that should interest the antitrust lawyers at the Federal Trade Commission (FTC) and the Department of Justice (DOJ). Notice that, though all of the retailers in the New York Times' excerpt, supra, lied about what the list prices was, telling the lie that it was $260 or greater, they all sold the Le Creuset’s iron-handle skillet (Skillet), supra, at the same $200.00 price. What that immediately suggests to an antitrust lawyer is that it appears that either the retailers coordinated to sell the Skillet at $200.00, which is a per se violation of the Sherman and Clayton Antitrust Acts, or they engage in something called conscious parallelism, which is also still a violation of antitrust law.

Here is how conscious parallelism work: Retailers don't want to compete on price. But they know that it is a per se violation of antitrust law for them to meet to in anyway coordinate their prices in the market. So they don't ever actually meet. Instead, one of the retailers, often but not always the one with the most market power, will signal the price to the others by setting a market price that all retailers in the market will charge for a good or service and whereby all the retailers can make far more profit and, thus, take far more money from consumers than they could if they were, in fact, actually competing against each other, instead of setting the price at some price which all the other retailers then see and follow.

If retailers, supra, didn't actually meet to set the price for the Skillet at $200.00, then we are left with the rather extraordinary and highly unlikely event that they all just happened to price the Skillet at $200.00, or they violated antitrust law by engaging in conscious parallelism. My bet is that all the retailers setting the same $200.00 price is too unlikely an event to be anything other than conscious parallelism.

So why doesn't either the FTC or DOJ investigate whether there is also conscious parallelism, as well as consumer fraud, happening with fraudulent list prices? The answer is that conscious parallelism has gotten a bad reputation with the federal courts, with the U.S. Supreme Court (Court) being highly skeptical about conscious parallelism and all but holding that conscious parallelism is impossible and, thus, can't be an antitrust violation. I think that the Court made a mistake in restricting conscious parallelism to such a small scope that an antitrust complainant must almost prove intentional coordination. The Court was wrong, even before the Internet and online sales, on the economics: in concluding that conscious parallelism is impossible because it isn’t worth the costs of trying to enforce and police such a tacit agreement and because some existing retailer or new entrant will violate the tacit parallel price and, thus, restore competition. But it is quite likely and is an enforceable tacit agreement to do parallel pricing, if enough retailers with sufficient market power combine to do it. And that appears to be what happened in the matter of the Skillet, supra, and may well be what frequently happens, when retailers with large online market share combine to lie about the list price for a good or service and then set a price for that good or service which is the same or nearly the same for all retailers.

But, even if the Court has been skeptical of conscious parallelism before the age of the Internet and online sales, it should reconsider its skepticism in the age of online sales, where it is easier, that is, less expensive and more effective, than ever before to signal parallel pricing, enforce that tacit agreement, and punish any retailer who violates the parallel price, especially where there is a dominant online retailer, such as Amazon, which can enforce the parallel price by punishing any retailer which refuses to adhere to it.

It is also true that conscious-parallelism cases are very expensive and hard to prove in that they require very sophisticated and complex economic analysis and expert opinion, yet the cases are provable and so should be prosecuted when the facts prove the crime.

But the fraud case is much easier to prosecute.

δωρεάν αγγελίες

very interesting thoughts

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