According to the Wall Street Journal, Amazon utilized an algorithm named “Project Nessie” in the past, which enabled the company to manipulate prices on its products and observe competitors’ reactions. This algorithm sometimes led to an increase in market prices, resulting in consumers having to spend more money. The revelation of Project Nessie has emerged from the Federal Trade Commission’s (FTC) monopoly lawsuit against Amazon, although specific details about the algorithm remained redacted. However, the WSJ uncovered further information shedding light on its operation.
The purpose of Project Nessie was to test the extent to which prices could be raised in a manner that would entice competitors to follow suit, as reported by the WSJ. In instances where competitors did not raise their prices accordingly, the program would revert its prices back to normal. Although Amazon ceased using Project Nessie in 2019, the reasons behind its discontinuation remain unclear.
These details highlight how Amazon harnessed the power of its e-commerce platform to influence competitors and pricing dynamics, often at the expense of consumers. The lawsuit against Amazon, initiated by the government, marks one of the most significant legal challenges faced by a Big Tech company. Simultaneously, Google also finds itself in the courtroom, defending its search business.
While Amazon did not provide an immediate comment on the matter, General Counsel David Zapolsky previously declared that the lawsuit would result in reduced product availability, higher prices, and slower deliveries for consumers. Zapolsky denounced the lawsuit as erroneous concerning both facts and laws.
The FTC declined to comment on the redacted information. However, spokesperson Douglas Farrar urged Amazon to promptly remove the redactions, allowing the public to fully comprehend the alleged illegitimate monopolistic practices they are accused of.
Despite its intent to increase prices, the Project Nessie algorithm did not solely lead to price hikes. It also served to match discounted prices from other retailers, such as Target. This occasionally initiated a “promotional spiral” in which Amazon and competitors would lower their prices to match each other, even after Target reverted to regular pricing. People familiar with the algorithm, cited by the WSJ, revealed this pattern. Overall, Project Nessie proved beneficial to Amazon, aiding in revenue recovery and enhancing the profitability of its retail business.
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