Amazon’s Secret ‘Project Nessie’ Algorithm Used to Drive Prices According to FTC

The media reports that the Federal Trade Commission (FTC) accuses Amazon of using a secret algorithm codenamed Project Nessie, which is applied to check the boundaries of price increases and is a guarantee that competitors will comply with pre-determined product cost limits.

Journalists report that the regulator adheres to the position that the e-commerce giant was able to maximize its profits in various categories of purchases. According to the FTC, by its actions, the retailer has encouraged competitors to make corporate decisions about price increases and charge customers a large fee. The relevant statements are contained in the redacted parts of the regulator’s antitrust lawsuit against the e-commerce giant.

The media reports that Project Nessie was created to automatically return the cost of the goods to the original indicator in case competitors cannot match the cost range set by Amazon. The e-commerce giant also used this algorithm in an advertising spiral. In this case, prices were compared with competitors’ discounts. Because of this, some third-party companies have revised their limits on the cost of goods downwards.

An Amazon representative in a comment to the media said that the FTC statements grossly distort the characteristics of the retailer’s tool. According to him, the goal of the Nessie Project was to prevent cases when the comparison of prices of the e-commerce giant leads to unusual results, manifested in the fact that the cost of goods was reduced to an unacceptable level. A representative of the company said that the tool had been used for several years on a subset of products, but the process of its functioning turned out to be different from what was originally intended, which is why it was decided to abandon this algorithm.

An FTC employee in a comment to the media said that the regulator is calling on the e-commerce giant to quickly eliminate the fixes and provide the American public with an opportunity to see the full scale of what, according to the watchdog, is an illegal monopolistic practice.

The FTC’s lawsuit against Amazon claims that the retailer’s control over third-party sellers on its virtual trading platform provokes price increases for consumers. The regulator also states that the e-commerce giant does not allow firms interacting with it to offer more affordable prices for goods in other places. If third-party sellers do not comply with this requirement of the retailer, Amazon downgrades their ads. The FTC believes that this practice is the reason for the increase in prices of goods in retail. The regulator explains such a pattern by the fact that due to restrictions on the part of the e-commerce giant, sellers are forced to use their Amazon price as the minimum.

The antitrust lawsuit was filed on September 26 by the FTC and 17 states. An Amazon representative, in response to the initial claims, said that the e-commerce giant’s practices had contributed to stimulating competition and introducing innovative solutions in the retail space. He also noted that the claim contradicts the facts and the law.

As we have reported earlier, FTC Proposes Ban on Fake Reviews.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.