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The United States Federal Trade Commission (FTC) has claimed that online commerce giant Amazon intentionally raised prices by more than $1 billion using secret algorithms.
Details from FTC’s lawsuit against Amazon filed in September were made public on Thursday as a new version of the lawsuit was made available in a Seattle court with fewer redactions. The FTC claimed that Amazon created a “secret algorithm internally codenamed ‘Project Nessie’ to identify specific products for which it predicts other online stores will follow Amazon’s price increases,” according to Reuters.
The FTC also alleged that executives at the company intentionally deleted messages on the messaging app Signal. They used a feature that makes messages disappear in an act that “destroyed more than two years” worth of communications from June 2019 to “at least early 2022”
The FTC and 17 states had filed the lawsuit against Amazon in September, alleging the company was using its dominant position in the market to inflate prices on and off its platform while overcharging sellers and stifling competition. With this, the e-commerce giant is accused of violating federal and state antitrust laws.
In a response published in September, Amazon had said that the lawsuit would lead to higher prices and slower deliveries for consumers—and hurt businesses. “If successful, (the lawsuit would) force Amazon to engage in practices that actually harm consumers and the many businesses that sell in our store—such as having to feature higher prices, offer slower or less reliable Prime shipping, and make Prime more expensive and less convenient,” David Zapolsky, Senior Vice President, Global Public Policy & General Counsel at Amazon, said in a statement.
The FTC suit noted that beginning in the early 2010s, Amazon began testing whether other online stores’ pricing algorithms were following the prices set by Amazon’s first-party retail arm, where the company directly controls prices, according to The Register.
The company then found that it could increase its prices while reducing the risk of shoppers finding the same items at a lower price off Amazon. This would be possible if the company focused its price increases on products sold by competitors that were matching Amazon’s prices. This marked the beginning of Project Nessie.
In a prepared statement, Amazon spokesperson Tim Doyle called the FTC’s claim “baseless and irresponsible,” reports the AP. “Amazon voluntarily disclosed employee Signal use to the FTC, painstakingly collected Signal conversations from its employees’ phones, and allowed agency staff to inspect those conversations even when they had nothing to do with the FTC’s investigation,” said Doyle.