The algorithm, deployed by Amazon, systematically inflated prices, as uncovered by the latest revelations in the FTC’s antitrust litigation against the behemoth of e-commerce. Project Nessie, Amazon’s tool for manipulating prices, was instrumental in Amazon’s strategy, working behind the scenes from 2015 to 2019.
According to the FTC, Amazon exploited Project Nessie to adjust prices upwards on its platform and influence other online marketplaces to do the same. This tactic allowed Amazon to elevate prices at strategic moments, banking on the likelihood that competitors would mirror these hikes, solidifying the increased price across the market.
The FTC’s lawsuit pointedly states that the sole aim of Project Nessie was to coerce other retailers into jacking up their prices, leading to an artificial inflation detrimental to consumers. The additional income derived from Project Nessie was decried as unjust enrichment at the expense of Amazon customers who were unknowingly overcharged.
Amazon is accused of leveraging this clandestine pricing algorithm to influence the cost of over 8 million products in just a single month of 2018, which resulted in a $334 million profit surge credited to Project Nessie. The FTC claims that from 2016 to 2018, Project Nessie fattened Amazon’s coffers by more than $1 billion in excess profits, a figure that excludes the extra costs consumers incurred at other retailers due to Amazon’s price manipulation, suggesting the true impact is even more substantial.
Amazon strategically paused Project Nessie during peak shopping periods, like Prime Day and the festive season, likely to avoid heightened scrutiny and customer criticism. Once attention waned, the FTC alleges that Amazon would reactivate Nessie more aggressively to compensate for the hiatus.
The company ceased using Project Nessie in 2019 amidst growing regulatory pressure but didn’t dismiss the notion of refining and reinstating the algorithm in subsequent years to enhance profit margins, as indicated by executive discussions on reviving “old friend Nessie” in early 2022.
The FTC’s filing comes with a stern warning that Amazon has the capability to resurrect or even amplify its use of Project Nessie at any moment, posing a continued threat to fair pricing and market competition.
In contrast, Amazon’s representative, Tim Doyle, has criticized the FTC’s portrayal of the algorithm, stating that Nessie’s purpose was to prevent unsustainable low pricing anomalies caused by their price-matching policy. He affirmed that after a trial period on a limited number of products, Amazon abandoned the project when it didn’t perform as anticipated.
The antitrust suit, backed by a united front of 17 state attorneys general, alleges Amazon’s anti-competitive behavior penalizes sellers and suppresses competitive pricing from other online merchants, branding Amazon a monopoly that utilizes its dominant position to its advantage, to the detriment of consumers and businesses alike.
