The e-commerce giant allegedly deployed a secret algorithm, internally known as “Project Nessie,” that raised the prices on its online store.
By Aaron Pan
Amazon created a secret algorithm that helps the e-commerce giant generate an extra $1 billion dollars, the U.S. Federal Trade Commission (FTC) alleged in a new court filing on Nov. 2.
According to the new, less redacted complaint, Amazon allegedly deployed a secret algorithm, internally known as “Project Nessie,” that raised the prices of items on its online store and, in turn, across the market accordingly.
Knowing that many websites set their prices to match Amazon’s prices, the company allegedly developed Nessie to increase prices on products that other retailers would follow.
After outside retailers began matching or increasing their own prices, Amazon would continue to sell the product at an inflated price, the FTC alleged, which resulted in $1 billion in excess profit.
The FTC accused Amazon of turning on and off Project Nessie to avoid scrutiny. “Aware of the public fallout it risks, Amazon has turned Project Nessie off during periods of heightened outside scrutiny and then back on when it thinks that no one is watching.”
The FTC called Nessie’s algorithm an “unfair method of competition” because it manipulates other online stores into raising prices, allowing Amazon to do the same.
“The sole purpose of Project Nessie was to further hike consumer prices by manipulating other online stores into raising their prices,” the FTC alleged.