2023-11-03 11:20:00
It’s an algorithm that would have made a lot of money for Amazon. According to the Federal Trade Commission (FTC), the American competition watchdog, the online commerce giant would have generated more than a billion dollars in additional profits thanks to this computer code allowing it to adjust its prices according to the competition.
Called the Nessie project internally, this algorithm was launched in 2010. But it remained secret for a long time. Its existence and operation were only revealed at the end of September as part of the FTC’s antitrust lawsuits against Amazon. New details were made public on Thursday, November 2.
Test price increases
Concretely, this algorithm aimed to optimize prices upwards. Its role was to test whether rivals followed Amazon-led price increases on certain products. In this scenario, the company kept these overvalued prices, assures the FTC. Otherwise, it reverted to the initial rate.
According to antitrust authorities, this practice was suspended during the Prime Days promotional period and during the end-of-year holidays. “When the public’s attention was elsewhere, Amazon reactivated the Nessie Project”, says the FTC complaint. The use of this algorithm was suspended in 2019.
Amazon defends itself
For the FTC, Project Nessie represents a “unfair method of competition”, allowing the Seattle group to increase its prices without losing its competitive advantage. And at the expense of consumers. “Amazon Used Project Nessie to Extract Over $1 Billion Extra Dollars from Americans’ Wallets”explains the FTC.
For Amazon, these explanations “grossly distort” reality. “Nessie was used to try to prevent our price matching strategy from leading to unusual results, where prices became so low that they were unsustainable,” assures the company.
“Block the competition”
This algorithm is only one element put forward by the FTC, which accuses Amazon of having implemented practices “illegal” in order to “block competition, curb the growth of rivals and consolidate its dominance”. She criticizes it in particular for implicitly prohibiting third-party merchants from offering lower prices elsewhere. This translates into prices “artificially higher”. And prevents the emergence of real competitors, capable of short-circuiting Amazon on prices.
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