Amazon is facing a lawsuit from the U.S. Federal Trade Commission (FTC) detailing alleged illegal strategies to increase profits from its online retail operations, including the use of a secret algorithm known as ‘Project Nessie.’
Amazon’s ‘Project Nessie’ algorithm is said to have manipulated online prices, leading to over $1 billion in excess profits from U.S. consumers.
“For example, Amazon has hiked so steeply the fees it charges sellers that it now reportedly takes close to half of every dollar from the typical seller that uses Amazon’s fulfillment service. Amazon recognizes that sellers find “that it has become more difficult over time to be profitable on Amazon” due to Amazon’s “increasing fees and costs.”
But as one seller explains, “we have nowhere else to go and Amazon knows it.” 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.
In addition to overcharging its customers, Amazon is degrading the services it
provides them. Amazon’s online storefront once prioritized relevant, organic search results. Following directions from its founder and then-CEO Jeff Bezos, Amazon shifted gears so that it now litters its storefront with pay-to-play advertisements.” FTC Case 2:23-cv-01495-JHC Document 114 Filed 11/02/23 Page 6 of 172
According the FTC filing, Amazon tested ‘Project Nessie’ starting in 2010, which identified products likely to be price-matched by competitors and then raised their prices. The FTC argues this is an unfair method of competition as it influences other stores to increase their prices, allowing Amazon to profit from the inflated prices.
Additionally, during periods of high customer attention, such as Prime Day or holiday seasons, Amazon paused the algorithm, resuming it afterward to compensate for the pause.
The FTC also highlighted concerns about Amazon requiring sellers using its Prime feature to use Amazon’s logistics services, despite potentially cheaper alternatives, and Amazon’s interactions with competitors like Walmart.
The FTC complaint includes accusations that Amazon sought to hide information from antitrust enforcers and destroyed communications from June 2019 to early 2022
Mr. Bezos is reported to have a net worth of $144.3 billion.
In 2022, Amazon reported a total revenue of $514 billion, with net profits reaching $225 billion, signifying a growth of 14.01% compared to the previous year.
Throughout the current year, the company’s reported revenue stands at $404.4 billion, with quarterly earnings of $127.4 billion in Q1, $134 billion in Q2, and a 13% increase to $143.1 billion in Q3.
When added to the $149.2 billion from 2022’s Q4, Amazon’s revenue sums up to an estimated $553.7 billion over the past four quarters.