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OMG Amazon using secret computer to raise prices!

Amazing. They try raising prices and watch competitors. I've never thought of that. Diabolically brilliant.


Isn't it illegal to compete with others in the marketplace and determine what the market will bear?


Amazon Used Secret ‘Project Nessie’ Algorithm to Raise Prices

The strategy, as described in redacted parts of FTC lawsuit, is part of agency’s case that Amazon has outsize influence on consumer prices


By Dana Mattioli, WSJ

Updated Oct. 3, 2023 4:54 pm ET


The algorithm helped Amazon improve its profit on items across shopping categories, according to people familiar with the allegations in the FTC’s complaint.


Amazon.com used an algorithm code-named “Project Nessie” to test how much it could raise prices in a way that competitors would follow, according to redacted portions of the Federal Trade Commission’s monopoly lawsuit against the company.


The algorithm helped Amazon improve its profit on items across shopping categories, and because of the power the company has in e-commerce, led competitors to raise their prices and charge customers more, according to people familiar with the allegations in the complaint. In instances where competitors didn’t raise their prices to Amazon’s level, the algorithm—which is no longer in use—automatically returned the item to its normal price point.


The company also used Nessie on what employees saw as a promotional spiral, where Amazon would match a discounted price from a competitor, such as Target.com, and other competitors would follow, lowering their prices. When Target ended its sale, Amazon and the other competitors would remain locked at the low price because they were still matching each other, according to former employees who worked on the algorithm and pricing team.


The algorithm helped Amazon recoup money and improve margins. The FTC’s lawsuit redacted an estimate of how much it alleges the practice “extracted from American households,” and it also says it helped the company generate a redacted amount of “excess profit.” Amazon made more than $1 billion in revenue through use of the algorithm, according to a person familiar with the matter.


“The FTC’s allegations grossly mischaracterize this tool,” an Amazon spokesman said. “Project Nessie was a project with a simple purpose—to try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable. The project ran for a few years on a subset of products, but didn’t work as intended, so we scrapped it several years ago.”


Project Nessie is one of a number of instances where the FTC’s complaint contends that Amazon’s monopoly power had broad impacts on raising consumer prices across retail.


The FTC declined to comment on the redacted material in the complaint, but FTC spokesman Douglas Farrar said: “We once again call on Amazon to move swiftly to remove the redactions and allow the American public to see the full scope of what we allege are their illegal monopolistic practices.”


In a statement last week, top Amazon lawyer David Zapolsky said the FTC is misunderstanding how online pricing and competition work.


“If they were successful in this lawsuit, the result would be anticompetitive and anti-consumer because we’d have to stop many of the things we do to offer and highlight low prices—a perverse result that would be directly opposed to the goals of antitrust law,” Zapolsky said.


A central argument the FTC makes is that Amazon’s power over third-party sellers on its website leads to higher prices for consumers, even those who are buying goods from a rival.



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