Amazon reportedly ran a secretive pricing algorithm known as “Project Nessie,” which may have generated over $1 billion in additional profits for the e-commerce giant, according to new details revealed in the US Federal Trade Commission’s (FTC) antitrust case against the company.
The existence of “Project Nessie” was initially disclosed in a previously redacted version of the monopoly lawsuit filed by the FTC and 17 state Attorneys General against Amazon, led by FTC Chair Lina Khan.
The FTC complaint stated, “Amazon has also quietly and deliberately raised prices for shoppers through a covert operation called ‘Project Nessie.’ Explicitly intended to inflate the prices that shoppers pay, Amazon’s Project Nessie has already extracted over a billion dollars from American households.”
When activated, this algorithm increases prices for specific products and, when other stores follow suit, maintains the higher price. Amazon described Project Nessie as “an incredible success.”
According to the FTC complaint, Amazon would turn off Project Nessie during periods of heightened scrutiny and then reactivate it when it believed it was not under observation. While Project Nessie is currently paused, there are no obstacles preventing Amazon from reactivating it at any time, the complaint added.
In response, an Amazon spokesperson stated that the “FTC claims that an old Amazon pricing algorithm called Nessie is an unfair method of competition that led to raised prices for consumers.” The spokesperson added, “This grossly mischaracterizes this tool. Nessie was used to trying to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable.”
The FTC and its state partners alleged in the lawsuit that Amazon’s actions allow it to hinder competitors and sellers from lowering prices, diminish quality for shoppers, overcharge sellers, impede innovation, and prevent rivals from fairly competing against Amazon.
FTC Chair Khan commented, “Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies.”
