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Amazon Accused of Using Secret Algorithm to Raise Prices and Delete Communications Amid FTC Antitrust Probe

by Anna

In a recently unveiled portion of the Federal Trade Commission’s (FTC) lawsuit, Amazon is accused of deploying a secret algorithm, codenamed “Project Nessie,” to raise prices on its platform and neighboring sites. These new revelations indicate that Amazon intentionally deleted communications amid the FTC’s antitrust investigation by using the Signal app’s self-destruct feature.

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According to the FTC, Project Nessie has been in use since 2014, enabling Amazon to identify products for price increases, with the aim of having other online retailers follow suit. The company would activate the algorithm to boost prices, and when other sellers adjusted their prices accordingly, Amazon maintained these elevated levels. It’s estimated that Project Nessie has generated over $1 billion in excess profits for Amazon. Although Amazon claims the algorithm is “currently paused,” the company has considered running experiments to improve its effectiveness in 2020 and 2021.

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Amazon’s spokesperson, Tim Doyle, has labeled the FTC’s claims as “baseless and irresponsible.” He clarified that Amazon voluntarily disclosed its use of the Signal app to the FTC and provided access to employee Signal conversations.

The lawsuit also delves into Amazon’s advertising business, alleging that then-CEO Jeff Bezos instructed executives to accept more low-quality ads, referred to as “defects,” to increase advertising revenue. The FTC claims that Bezos believed these ads would yield higher profits despite being a nuisance for consumers.

Additionally, the lawsuit touches on Amazon’s fulfillment service, Fulfillment by Amazon (FBA). The agency alleges that in early 2019, Amazon abandoned a program that allowed sellers to display a Prime badge on their listings without using FBA, as it learned that other fulfillment providers were advertising their services to sellers. While Amazon suspended enrollment in the program, the FTC contends that in 2018, sellers using the program met Amazon’s “delivery estimate” requirement over 95% of the time.

NetChoice, an industry group supported by Amazon, criticized the FTC’s allegations, arguing that the agency was being misleading and that delivery estimates were set by the sellers themselves.

The lawsuit is part of the U.S. government’s efforts to address Amazon’s market power and alleged antitrust violations, with a focus on its pricing strategies and influence in the e-commerce sector.

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