Amazon made extra $1 bn in profit via secret pricing algorithm: US FTC

Amazon ran a secret pricing algorithm, codenamed “Project Nessie”, that may have generated the e-commerce platform more than $1 billion in extra profits, according to new details that emerged from the US Federal Trade Commission’s (FTC) antitrust case against the company.

The existence of ‘Project Nessie’ was first revealed in a previously redacted version of the monopoly lawsuit filed by the Lina Khan-led FTC and 17 state Attorneys General against the e-commerce major, reports The Verge.

“Amazon has also quietly and deliberately raised prices for shoppers through a covert operation called ‘Project Nessie’,” read the FTC complaint.

“Explicitly intended to inflate the prices that shoppers pay, Amazon’s Project Nessie has already extracted over a billion dollars from American households,” it added.

When activated, this algorithm raises prices for those products and, when other stores follow suit, keeps the now-higher price in place. Amazon deemed Project Nessie “an incredible success”.

“Aware of the public fallout it risks, Amazon has turned Project Nessie off during periods of heightened outside scrutiny and then back on when it thinks that no one is watching,” the FTC complaint alleged.

While Project Nessie is currently paused, “Amazon could turn it back on at any time. Indeed, Amazon has repeatedly considered turning it back on — and there are no obstacles preventing Amazon from doing so,” read the FTC complaint.

An Amazon spokesperson told The Verge in a statement 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”.

“This grossly mischaracterises 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 company spokesperson added.

The FTC and its state partners had said in the lawsuit that Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Khan.