The Blubber

The Federal Trade Commission has said Amazon, $AMZN, deliberately raised prices by more than $1 billion through secret algorithms known as "Project Nessie."

Amazon employed various illicit tactics to enhance profits in its online retail empire, as revealed in a new court filing by the Federal Trade Commission (FTC) on Thursday. The FTC had filed a lawsuit in September, but many details were confidential until the release of a less redacted version in a Seattle US District Court.

According to the FTC, Amazon used a covert algorithm internally named 'Project Nessie' to identify specific products that it predicted other online retailers would emulate in terms of price increases. The FTC alleged that this strategy led to Amazon extracting over $1 billion directly from American consumers. Amazon spokesperson Tim Doyle responded by stating that the FTC had grossly mischaracterized the pricing tool and that the company had ceased using it several years ago. He mentioned that Nessie aimed to prevent price matching from leading to unsustainable price drops.

The FTC's complaint asserted that Amazon started testing the pricing algorithm in 2010 to ascertain whether other online retailers monitored its prices and to raise prices for products that were likely to be tracked by competitors. When external retailers matched or raised their prices, Amazon would continue selling the product at inflated prices, ultimately leading to $1 billion in extra profit.

The FTC claimed that Amazon temporarily suspended the algorithm during Prime Day and the holiday shopping season, times when there was more public and customer scrutiny. It alleged that after public attention waned, Amazon reinstated Project Nessie more broadly to compensate for the pause.

Amazon employed Project Nessie to set prices for over 8 million items bought by customers, amounting to nearly $194 million collectively, in April 2018, according to the complaint. Amazon retail executive Doug Herrington suggested in January 2022 that they consider using "old friend Nessie, perhaps with some new targeting logic" to enhance profits for Amazon's retail division.

Additionally, the FTC complaint accused Amazon of attempting to conceal information about its operations from antitrust enforcers by using the disappearing message feature of the Signal messaging app and stated that the company had destroyed communications from June 2019 to early 2022.