The Daily Mail said in a report that two lawsuits filed in Washington courts by separate plaintiffs had shed light on retail giant Amazon's shipping price service scheme. Both of the plaintiffs reportedly claimed that the $79 annual Prime service fee that Amazon offered did not come in with the free 2-day shipping it has promised. According to the lawsuits, Amazon offered free shipping on items of which their prices are already inflated to compensate the cost to ship them.
Daily Mail said Marcia Burke, a customer who has filed one of the lawsuits, is applying for a group status. Courthouse News reported that Burke claimed the online retail company has violated the Washington Consumer Protection Act.
"(The purportedly) free (shipping items) ultimately include shipping charges. Furthermore, [Amazon] provides these vendors priority by showing their items first in the Prime member's product search results. By concealing the shipping charges in the price of the product. Amazon is able to recoup the cost of shipping because it receives a percentage of the product's price," Burke said in her lawsuit.
Burke is reportedly seeking a refund of the subscription fees paid to Amazon for its Prime service between 2007 and 2011.
The lawsuits filed against Amazon in Washington followed the online retail giant's decision to raise the fees for its Prime service. Businessweek said that on Thursday, Amazon confirmed that it will be jacking up the $79 annual fee for its two-day shipping service by 25%. According to its letter to Prime members, the need to increase the fee is due to fuel and transportation costs and the coverage the service provides to over 20 million products sold on its website.
Amazon watcher Mark Mahaney at RBC Capital Markets is curious on how the service fee increase will affect Amazon's customer base. He told Businessweek, "Based on our recent conversations with Costco, we don't believe that Amazon will see a material increase in Prime subscription churn as a result of the increased membership fee. Although, we wonder if a meaningful price increase would dissuade some on-the-fence potential Amazon Primers from ponying up for the membership."
