Online price mistakes - e-Business...

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Amazon.co.uk Price Mistake

On the morning of 19th March 2003, thousands of people across the UK were alerted by friends and colleagues that a product on the Amazon.co.uk site was being sold at an unusually low price. A possible price mistake? It looked very likely.

The product in question was the "HP iPAQ H1910 Pocket PC" Electronics; @ GBP 7.32 each.

At midday on the same day Amazon.co.uk posted the following message on its homepage:

"We'll be right back!
We're sorry, but our store is closed temporarily. We expect to be back soon.
If you would like to be notified when we reopen, please leave your
e-mail address below and we will be happy to let you know."

It looked possible that there may have been more pricing errors on the Amazon.co.uk database so they had to pull the whole site.

It later emerged that Amazon did indeed make a price mistake the HP iPAQ H1910 Pocket PC should actually be 287. They said "We will be cancelling orders made for the HP iPaq Pocket PCs at the incorrect price this morning. As the Conditions of Use clearly state, there is no contract between Amazon.co.uk and the customer for an item until Amazon.co.uk accepts the customer order by an email confirming that it has dispatched the item. Until that time, Amazon.co.uk is within its rights to not accept any customer order".

Contributor comment

Amazon closes after price error! - Thursday 20th March 2003

By Paul Abbiati, a PMMS Legal Consultant: law@abbiati.co.uk

Will Amazon consumers get their pocket computers for seven pounds? Not according to Amazon and I have to agree with Amazon on this one. This case is very different to the famous online Kodak camera price mistake in January 2002.

Sky News reported the price error on Wednesday March 19th:

"A shopping website has admitted it made a mistake in advertising expensive computers for 7.32. Amazon had to shut down its UK site after it was inundated with people who found out about the deal, and it now says customers will not receive their orders.

The company has revealed that a "price discrepancy" led to handheld PCs made by Hewlett Packard going on sale at a massive discount. The iPaq H5450 model, which usually sells for 500 in the shops was on sale for just 7.32 and the iPaq H1910, which costs 280 was selling for 23.04.

Many customers entered their credit card details and had their orders accepted on the internet site. But Amazon says: "We will be cancelling orders made for the HP iPaq pocket PCs at the incorrect price this morning."

One buyer, 41 year old Iain Macauley, placed an order after being told about the bargain through a friend's email. He thinks the company should honour the low price: "They have taken my credit card details and given me a confirmation number, so they should now provide the goods."

The Kodak price mistake fiasco 2002

In January 2002, Kodak, refused to honour orders for a digital camera advertised on their website at a 100, even though in some cases consumers received confirmation of their orders, relying on firstly, their standard terms on the site, which were the terms of sale which state that Kodak had the right to change the content of the website at any time including prices; secondly, the defence of mistake in English law which makes a contract void and thirdly, that the display of price-marked goods wherever the display is, is not an offer to sell goods but, is an invitation to a customer to make an offer to buy ( 'an invitation to treat'). Eventually, Kodak surrendered and honoured orders. It was estimated by the Financial Times that Kodak's losses were several million.

Amazon are one of the best e-tailers in the world with solid terms. Their Conditions make it clear that no contract subsists between Amazon and a consumer until Amazon accepts their order by e-mail confirming that it has dispatched their products. They continue "that acceptance will be deemed complete and will be deemed for all purposes to have been effectively communicated to you at the time Amazon.co.uk sends the e-mail to you (whether or not you receive that e-mail)."

And finally, they state that "price and availability information is subject to change without notice"

Also, unlike Kodak, Amazon have a good defence that most people must have realised that the price was a mistake.

See also: BBC

Is your e-business legal?

Online price mistakes

Problem:

Dear e-law doctor, we advertised a computer on our Business-to-Consumer (B2C) web site at the wrong price by mistake and customers have ordered thousands of them. We have e-mailed the customers stating that we apologise and there is no binding contract because we did not confirm the order.

Some customers are now threatening us with legal action.

Answer and remedy:

Pricing error on web site costs Buy.com $575,000

Approximately 7,000 customers have just brought a successful class action lawsuit in America against Buy.com. for a mistakenly priced item on their web site. Buy.com have agreed to pay $575,000 in compensation. The terms of the settlement, which is subject to court approval, provide that after legal expenses, each customer will receive about $50.

A Hitachi monitor was offered on the Buy.com site in 1999 for $164.50, instead of $588, by human error over a period of 4 days.

Buy.com said it would honour the stated price for the 143 monitors that it had in stock, but that it would cancel all other orders. Then they changed their terms and conditions for future sales on their site reserving the right to cancel or refuse orders for items offered at an incorrect price.

Online price mistake - Kodak

Kodak case

Kodak, have refused to honour orders for a digital camera advertised on their website at a 100, even though in some cases consumers received confirmation of their orders, relying on firstly, their standard terms on the site, which were the terms of sale which state that Kodak had the right to change the content of the website at any time including prices; secondly, the defence of mistake in English law which makes a contract void and thirdly, that the display of price-marked goods wherever the display is, is not an offer to sell goods but, is an invitation to a customer to make an offer to buy ( 'an invitation to treat').

The Argos case

The case is being compared to the Argos case in 1999 where the retailer Argos mistakenly advertised a television set for 3 instead of 299 on its website and refused to honour hundreds of orders worth more than 1m including one for 1,700 sets! If Argos had communicated acceptance electronically, it was the principle of mistake in that case which got them off the hook!

But, victims of the mistake are arguing amongst other things that if they received a written order confirmation, that is acceptance and there is a binding contract.

All web sites should avoid such adverse public actions by making sure:

  • that the information on their sites is accurate
  • they have secure terms and conditions for e-tailing
  • that the terms reserve the right to cancel or refuse orders for items offered at an incorrect price

    Read more about online price mistakes




    Guest article by our legal contributors, Abbiati e-law consultancy Ltd, 2001. Specialists in international e-business law:

  • e-law training
  • e-law consultancy

    If you have a question for us or require training or consultancy please e-mail law@abbiati.co.uk

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