Amazon made $1 billion with algorithms used to raise prices, says FTC

 

The United States Federal Trade Commission (FTC) has alleged that Amazon utilized secret algorithms, resulting in over $1 billion in increased prices for products on its platform. Details from the FTC's lawsuit, filed in September, have been unveiled, shedding light on Amazon's purported pricing strategies.

• Algorithmic Price Manipulation: The FTC claims that Amazon employed a clandestine algorithm, internally known as 'Project Nessie,' to forecast which products would prompt price hikes from other online retailers. This algorithm allegedly led to over $1 billion in higher prices.
• Message Deletion Controversy: The FTC also alleges that Amazon executives intentionally deleted messages on the messaging app Signal, erasing over two years of communications despite the FTC's request not to do so.

The FTC's lawsuit, joined by 17 states, accuses Amazon of leveraging its dominant market position to inflate prices both on and off its platform, overcharge sellers, and stifle competition, potentially violating federal and state antitrust laws.

Amazon responded, contending that the lawsuit would ultimately harm consumers and businesses. The company began testing other online stores' pricing algorithms in the early 2010s, seeking to ensure they mirrored Amazon's pricing. As a result, Amazon discovered it could raise prices while minimizing the risk of shoppers finding lower prices elsewhere, particularly by increasing prices on products sold by competitors matching Amazon's prices, giving rise to 'Project Nessie.'

Amazon's spokesperson, Tim Doyle, dismissed the FTC's claims as "baseless and irresponsible." Amazon voluntarily disclosed Signal conversations to the FTC and allowed agency staff to inspect them, even when unrelated to the investigation, Doyle stated.