A search on Amazon for high-end watchmaker Multi Time Machine’s “Special Ops” watch reveals various timepieces. However, none of them are actually produced by Multi Time Machine.
Since Amazon doesn’t sell the “Special Ops” watch, those results all belong to Multi Time Machine’s competitors. That could confuse potential customers, the watchmaker claimed in a lawsuit that moved forward on Monday, when a federal appeals court ruled that Multi Time Machine was entitled to a trial.
“A jury could find that Amazon has created a likelihood of confusion,” the court wrote.
It’s not the first time Amazon has been accused of misleading customers. In 2014, cosmetics company Lush won a similar case in the U.K., where the High Court ruled that the retailer could not use the term “Lush” or imply that it sold Lush products. Another 2014 lawsuit alleged that Amazon encouraged third-party sellers to inflate prices for Prime customers in order to cover shipping costs.
These complaints highlight a major contention that manufacturers have with Amazon, which accounts for about one-third of online retail in the U.S. and 38% of mobile commerce. While the retailer’s impressive reach is advantageous to brands, its search and pricing algorithms can be misleading and potentially detrimental.
Amazon uses a dynamic algorithm to determine prices, charging significantly less than the “list price” to highlight savings for shoppers. These prices don’t include shipping fees, which can raise the final list price. Furthermore, “list” or original prices are inflated to exaggerate discounts. For example, Amazon claims Dior Blackout mascara has a list price of $53.38 and an Amazon price of $33. But the savings are far less dramatic when factoring in the $9.86 shipping fee that applies to the Amazon order. Moreover, the mascara actually retails for $25 on Dior.com.
This is especially misleading because the beauty industry strictly regulates prices across channels,. L2 researchers found that like Dior.com, the websites of five major retailers (Bergdorf Goodman, Nordstrom, Sephora, Bloomingdale’s and Macy’s) sell the mascara for $25. Amazon is the only retailer that diverges from this pricing scheme.
The mascara costs more on Amazon because it is sold by third-party vendors who have an incentive to charge slightly less than the market’s lowest price. Amazon’s acceptance of these third-party retailers has made prestige retailers weary of working with Amazon: Only 13 percent of prestige beauty brands and 9 percent of prestige hair care brands sell their products directly on Amazon, according to L2 research. Most of the millions of Beauty SKUs are sold by third-party vendors, creating a messy “gray market” where pricing and quality are unregulated.
In an effort to regulate the gray market and help consumers wade through the vast array of listed products, Amazon has taken action to pare down the options – but only for brands that officially distribute on its site. Officially distributing brands have, on average, 820 listed products. For brands that opt not to do so, like Michael Kors, Ralph Lauren and Estee Lauder, the average is nearly 1600.
A ruling in favor of Multi Time could tilt the odds in favor of brands that don’t distribute on Amazon. At the very least, it would give them the green light to legally question some of the misleading claims that appear on Amazon product pages.