According to recently unredacted portions of the Federal Trade Commission’s lawsuit, Amazon utilized a undisclosed algorithm to effectively increase prices on competing online platforms and hindered internal communication while being investigated for antitrust violations.
New information released on Thursday claims that leaders at the online retail company deliberately erased conversations by utilizing a function on the well-known app Signal that causes messages to vanish. According to the Federal Trade Commission (FTC), Amazon disregarded instructions and deleted over two years’ worth of communication from June 2019 to early 2022.
In a statement provided by Amazon representative Tim Doyle, he referred to the FTC’s accusation as “groundless and reckless.”
Doyle stated that Amazon willingly shared information about employees using Signal with the FTC. The company diligently gathered Signal conversations from employee phones and permitted the agency to review them, even if they were not relevant to the investigation.
In September, the FTC and 17 states filed a lawsuit against Amazon, claiming that the company was using its dominant market position to raise prices both on and off its platform, overcharging sellers, and hindering competition. Amazon is being accused of breaking federal and state antitrust laws, but the company has strongly defended its business strategies.
The government’s antitrust lawsuit is a bold attempt to control the dominant market influence of Amazon, headquartered in Seattle. This action is part of the FTC’s recent efforts to take strong action against large tech corporations.
The recently revealed sections of the lawsuit, made public on Thursday, revealed additional information about a widely discussed algorithm that was previously mentioned by The Wall Street Journal and former Vox journalist Jason Del Ray.
The FTC reports that Amazon has utilized a tool called “Project Nessie” to identify products that will bring in higher profits. The company has used this tool to anticipate areas where it can increase prices and influence other online retailers to do the same. Amazon has implemented the algorithm to raise prices on certain products, and when other retailers followed suit, they maintained the elevated prices. The FTC states that Amazon has made over $1 billion in additional profits through the use of Nessie.
The organization announced that Amazon implemented Project Nessie in 2014 and has activated and deactivated it a minimum of eight times from 2015 to 2019.
According to regulators, Amazon has stated that the algorithm is currently on hold, but the company has considered conducting experiments in 2020 and 2021 in order to enhance its efficiency.
Amazon’s Doyle referred to Nessie as an outdated pricing algorithm that has been unfairly portrayed by the agency. He explained that Nessie was implemented to prevent Amazon’s price matching strategy from leading to abnormally low prices that were not sustainable. However, it was discontinued a few years ago due to its failure to function as intended.
The unrevised sections of the legal complaint also provide additional insight into Amazon’s advertising operations.
The company was accused of following then-CEO Jeff Bezos’ instructions to allow more low-quality ads, known internally as “defects,” in order to increase revenue from advertising. Despite the potential inconvenience for consumers, Amazon denied these claims and stated that they were misrepresented.
In the meantime, new information from the lawsuit reveals further evidence of the government’s claim that Amazon is forcing sellers to utilize its logistics service, known as Fulfillment by Amazon (FBA).
In the beginning of 2019, the agency reported that the company changed its stance on a program that enabled sellers to showcase a Prime badge on their listings without utilizing FBA. This decision was made after discovering that other fulfillment providers were promoting their services to sellers. Amazon halted enrollment in the program a couple of years ago, stating that it did not meet the high standards expected by Prime customers. However, according to the agency, in 2018, sellers who were part of the program were able to meet Amazon’s “delivery estimate” requirement over 95% of the time.
Industry group NetChoice, supported by Amazon, stated on Thursday that the FTC was providing inaccurate information and that the delivery estimates mentioned in the complaint were determined by sellers, not Amazon. Amazon’s representative Doyle also mentioned that in 2018, sellers using the program only delivered within two days in less than 16% of cases, which is significantly worse than the performance of sellers using Fulfillment by Amazon.
The program’s enrollment was reopened a few months ago, despite being scrutinized by regulators.