Amazon – Amazon.com utilized a number of illegal techniques to maximize profits at its online retail empire, including an algorithm that increased prices paid by US consumers by more than $1 billion, according to a new court filing on Thursday by the US Federal Trade Commission.
The FTC case was filed in September, but many details were concealed until Thursday, when a version of the lawsuit with fewer redactions was made public in the United States District Court for the District of Columbia.
Amazon, which has 1 billion items in its online store, developed a “secret algorithm internally code named ‘Project Nessie’ to identify specific products for which it predicts other online stores will follow Amazon’s price increases… Amazon used Project Nessie to extract more than a billion dollars directly from Americans’ pocketbooks,” according to the FTC.
According to Amazon spokesperson Tim Doyle, the FTC “grossly mischaracterizes” the price tool, which the business discontinued utilizing several years ago.
“Nessie was used to try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable,” Doyle said in a statement.
The FTC said that after other merchants began matching or raising their own prices, Amazon would continue to sell the product at an inflated price, resulting in a $1 billion profit.
According to the FTC, Amazon stopped the algorithm during its Prime Day sales events and the holiday shopping season, when the online retailer received more media and customer attention.
According to the complaint, Amazon retail executive Doug Herrington inquired in January 2022 about employing “old friend Nessie, perhaps with some new targeting logic” to enhance earnings for Amazon’s retail unit.
The FTC dubbed Nessie’s algorithm a “unfair method of competition” since it induces other online retailers to raise their prices, allowing Amazon to do the same.
The FTC complaint also accuses Amazon of attempting to conceal information about its operations from antitrust regulators by exploiting the Signal messaging app’s vanishing message feature, and claims that the corporation erased communications between June 2019 and early 2022.
The FTC stated in its lawsuit that Amazon does not allow other large online retailers, such as Walmart.com, to sell on its platform. Mr. Bezos testified that Amazon treats Walmart.com differently than smaller sellers because “it’s just different because of the scale and (be)cause of the competitive situation and so on.”
According to a largely redacted section of the lawsuit, Amazon allegedly discouraged Walmart in 2017 from extending discounts to online buyers who picked up their purchases from Walmart locations. For this report, Walmart refuses to respond.
According to the complaint, one Amazon seller developed a policy of “absolutely ensuring that our products are not priced lower on Walmart than they are on Amazon” in response to Amazon’s demand.