According to the news agency Reuters, the FTC lawsuit was filed in September and has now been made public in the US District Court in Seattle.
What is Project Nessie
Amazon created a “secret algorithm internally code-named Project Nessie” that can identify specific products for which it can predict if other online platforms will follow if Amazon increases their price.
Why is it in trouble in the US
FTC said that Amazon allegedly started testing the pricing algorithm in 2010 to see if other online channels tracked its prices. The company was also accused of raising prices for products that were likely to be tracked by competitors.
The lawsuit also alleged that when other e-tailers started matching or increasing their prices, Amazon would continue to sell the products at an inflated price which resulted in $1 billion in excess profit.
FTC noted that Amazon used to pause the algorithm during its Prime Day sales events and the holiday shopping season. The company allegedly did as there was more media and customer attention on the online retailer.
“After the public’s focus turned elsewhere, Amazon turned Project Nessie back on and ran it more widely to make up for the pause,” the lawsuit added.
In 2018, Amazon used the algorithm to set prices for more than 8 million items purchased by customers which collectively cost almost $194 million, the lawsuit noted. However, the tool was paused in 2019.
The filing also added that Amazon retail executive Doug Herrington asked about using “old friend Nessie, perhaps with some new targeting logic” to boost profits for the company’s retail arm in 2022.
FTC also accused Amazon of trying to hide information about operations from antitrust enforcers. The company allegedly used the Signal messaging app’s disappearing message feature and destroyed communications from June 2019 to early 2022.
The lawsuit also complained that Amazon targeted sellers and used unfair means to compete with Walmart.
What Amazon has to say
Amazon spokesman Tim Doyle said that the FTC “grossly mischaracterises” the pricing tool. He also noted that the company has also stopped using the algorithm several years ago.
Doyle explained: “Nessie was used to try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable”.