Amazon generated over $1 billion in excess profits through its use of a secret algorithm called “Project Nessie,” according to newly unredacted portions of the Federal Trade Commission’s (FTC) antitrust lawsuit against the e-commerce giant. Project Nessie, which ran from 2015 to 2019, inflated prices by predicting whether other online stores would follow Amazon’s price hikes. By raising prices when it was most likely to be imitated and maintaining them after other retailers adopted similar increases, Amazon intentionally raised consumer prices. The agency claims that these additional profits could have remained in shoppers’ pockets if not for Amazon’s use of Project Nessie.
In one month alone in 2018, Amazon leveraged the secret algorithm to set prices for more than 8 million items, resulting in an estimated additional $334 million in profits. The FTC alleges that between 2016 and 2018, Project Nessie generated over $1 billion in excess profits for Amazon, a figure that likely does not account for the additional amount shoppers paid at other stores due to the algorithm. Although Amazon paused the algorithm during busy shopping periods like Prime Day and the holiday season, it considered bringing it back to improve its effectiveness in 2020 and 2021. The FTC warned that Amazon could easily revive the algorithm at any time to increase prices and undermine competition.
Amazon spokesperson Tim Doyle disputes the FTC’s characterization of “Nessie” and claims it was intended to prevent unsustainable price matching outcomes. Doyle argued that the project was discontinued several years ago after failing to achieve its intended purpose. However, the FTC, along with a coalition of 17 state attorneys general, sued Amazon in late September, accusing the company of employing anti-competitive measures that harm sellers and discourage competitors from offering lower prices. The agency argues that Amazon, as a monopolist, exploits its position to the detriment of consumers and businesses alike.
