Amazon.com used a series of illegal strategies to boost profits from its online retail empire, including an algorithm that inflated the prices of U.S. homes by more than $1 billion, it said on Thursday. Trade Commission.
The FTC complaint was filed in September, but many details were withheld until Thursday, when a less redacted version of the complaint was made public in the US District Court in Seattle.
Amazon, which has 1 billion items in its online superstore, has created a “secret algorithm internally called ‘Project Nessie’ to identify specific products for which it predicts that other online stores will follow Amazon’s price increase,” the FTC said.
“Amazon used Project Nessie to take over a billion dollars directly from the pockets of Americans,” he added.
Amazon spokesman Tim Doyle said the FTC “grossly misrepresented” the pricing tool and that the company stopped using it several years ago.
“Nessie was used to try to prevent our price matching from leading to unusual results where prices became so low that they were unsustainable,” Doyle said.
Amazon began testing its pricing algorithm in 2010 to determine whether other online retailers were tracking its prices and to raise the prices of products likely to be tracked by competitors, according to the complaint.
After third-party sellers began matching or raising their prices, Amazon would continue to sell the product at inflated prices, the FTC said, resulting in $1 billion in excess profits.
Amazon stopped the algorithm during Prime Day sales events and the holiday shopping season, when there is more attention to the online retailer from the media and customers, according to the FTC.
“After public attention shifted elsewhere, Amazon reignited Project Nessie and ran it more broadly to make up for the hiatus,” the suit says.
Amazon, in April 2018, used it to set the prices of more than eight million items purchased by customers collectively worth about $194 million, the lawsuit said, before it was discontinued in 2019.
Amazon retail executive Doug Herrington asked in January 2022 about using “old friend Nessie, maybe with new targeting logic” to increase revenue at Amazon’s retail arm, according to the complaint.
The FTC complaint also accused Amazon of trying to hide information about its operations from antitrust authorities by using a missing messaging feature in the Signal app and said the company destroyed communications from June 2019 to early 2022.