Amazon Made $1 Billion Through Secret Price Raising Algorithm, Says FTC

Amazon used a secret algorithm to boost prices to U.S. households by more than $1 billion, says the FTC in ia new court filing. "The FTC lawsuit was filed in September but many details were withheld until Thursday when a version of the lawsuit with fewer redactions was made public in U.S. District Court in Seattle," notes Reuters. From the report: Amazon, which has 1 billion items in its online superstore, created 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," the FTC said. Amazon began testing the pricing algorithm in 2010 to see if other online retailers tracked its prices and to raise prices for products that were likely to be tracked by competitors, the complaint said. After outside retailers began matching or increasing their own prices, Amazon would continue to sell the product at an inflated price, the FTC alleged, which resulted in $1 billion in excess profit. Amazon paused the algorithm during its Prime Day sales events and the holiday shopping season when there was more media and customer attention on the online retailer, the FTC said. "After the public's focus turned elsewhere, Amazon turned Project Nessie back on and ran it more widely to make up for the pause," the lawsuit said. Amazon in April 2018 used it to set prices for more than 8 million items purchased by customers that collectively cost almost $194 million, the complaint said, before pausing it in 2019. Amazon retail executive Doug Herrington in January 2022 asked about using "old friend Nessie, perhaps with some new targeting logic" to boost profits for Amazon's retail arm, the complaint said. The FTC complaint also accuses Amazon of seeking to hide information about operations from antitrust enforcers by using the Signal messaging app's disappearing message feature and said the company destroyed communications from June 2019 to early 2022. Amazon also required sellers using its Prime feature to utilize its logistics and delivery services, leading to increased fees for sellers who used its fulfillment services from 27% in 2014 to 39.5% in 2018, as per the FTC. Furthermore, the complaint mentioned that Amazon treated Walmart.com differently, not allowing it to sell on its platform and allegedly deterring Walmart from offering discounts to shoppers who picked up their purchases from Walmart stores. Further reading: Amazon Boosted Junk Ads and Deleted Messages To Thwart Antitrust Probe, FTC Says

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