Amazon used a series of illegal strategies to stay on top of online retailing while pushing up prices for buyers and extracting more revenue from independent sellers, the Federal Trade Commission said Thursday.
Amazon deliberately raised prices by more than $1 billion through secret algorithms known as “Project Nessie,” the FTC said.
The $1 trillion company monitored its sellers and punished them if they offered lower prices on other platforms, the FTC said.
The FTC filed suit against the company in September but many details were withheld from public view until Thursday when a version of the lawsuit with fewer redactions was made public in US District Court in Seattle.
The newly unsealed details shed light on the FTC’s case that Amazon wields monopoly power that “uses a set of interlocking anticompetitive and unfair strategies.”
The FTC said Amazon 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.”
Amazon spokesman Tim Doyle said the FTC “grossly mischaracterizes” the pricing tool and the company stopped using it 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.
Amazon also required sellers under the company’s Prime feature to use its logistics and delivery services even though many would allegedly prefer to use a cheaper service or one that would also service customers from other platforms where they sell, the FTC said.
“While Project Nessie is currently paused, Amazon could turn it back on at any time. Indeed, Amazon has repeatedly considered turning it back on — and there are no obstacles preventing Amazon from doing so,” the FTC said.
Amazon began using Nessie in 2014, and by 2018 Amazon used it to set prices that were viewed by shoppers more than 400 million times, the FTC 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 “[o]ur old friend Nessie, perhaps with some new targeting logic” to boost profits for Amazon’s retail arm, the FTC complaint said.