THE WHAT? Amazon has been accused by the U.S. Federal Trade Commission (FTC) of employing illegal strategies to increase profits within its online retail business. The FTC alleges that Amazon used an algorithm called ‘Project Nessie’ to raise prices paid by U.S. households by more than $1 billion.
THE DETAILS The lawsuit by the FTC was filed in September, and previously undisclosed details were made public in a less-redacted version in the U.S. District Court in Seattle. According to the FTC, ‘Project Nessie’ was created to identify products for which Amazon anticipated competitors would follow its price increases, allowing Amazon to extract more than a billion dollars directly from consumers.
THE WHY? Amazon’s spokesperson, Tim Doyle, contested the FTC’s characterization, stating that ‘Nessie’ was intended to prevent unsustainable price reductions due to price matching and that the company stopped using it several years ago. The algorithm was initially tested in 2010 to assess whether other online retailers tracked Amazon’s prices and to increase prices for products likely to face competitive tracking. The FTC also alleges that Amazon temporarily suspended the algorithm during significant events like Prime Day and the holiday shopping season and resumed its use when public attention waned.