Amazon's $1 BILLION secret algorithm exposed: Retail giant accused of pushing up prices to encourage competitors to do the same in bombshell redacted claims from FTC anti-trust lawsuit
- Amazon has been accused of adopting algorithm which tested whether competitors would follow suit when it raised the price of a product
- 'Project Nessie' tactic was deployed until 2019, according to new claims from an anti-trust lawsuit filed by the FTC
- READ MORE: FTC sues Amazon accusing the online retailer of wielding monopoly power to jack up prices
Amazon has been accused of adopting a secret algorithm to raise prices in a way competitors would follow helping to boost their revenue by $1 billion, insiders claim.
The tactic - dubbed 'Project Nessie' - effectively tested new price points on its products to see if it would encourage competitors to follow suit. If they did not, Amazon would automatically return the item to its previous cost.
The bombshell claims form part of an anti-trust lawsuit filed by the Federal Trade Commission (FTC). The suit centers around concerns Amazon - which is owned by Jeff Bezos, the third richest man in the world - has stifled competition in the market and harmed consumers by driving up prices.
In redacted extracts from the filing, seen by the Wall Street Journal, former employees claimed the 'Nessie algorithm' also helped to identify discounted prices being offered by competitors.
For example, if Target.com lowered the price of a product, Amazon would then match this low cost encouraging other retailers to do the same.
![Amazon has been accused of adopting a secret algorithm to raise prices in a way competitors would follow helping to boost their revenue by $1 billion, insiders claim](https://i.dailymail.co.uk/1s/2023/10/03/22/76133223-12590239-image-a-10_1696367618893.jpg)
Amazon has been accused of adopting a secret algorithm to raise prices in a way competitors would follow helping to boost their revenue by $1 billion, insiders claim
![The FTC lawsuit centers around concerns Amazon - which is owned by Jeff Bezos, the third richest man in the world - has stifled competition in the market and harmed consumers by driving up prices. Pictured: Bezos with his fiance Lauren Sánchez](https://i.dailymail.co.uk/1s/2023/10/04/21/76133255-12590239-The_FTC_lawsuit_centers_around_concerns_Amazon_which_is_owned_by-a-1_1696450109030.jpg)
The FTC lawsuit centers around concerns Amazon - which is owned by Jeff Bezos, the third richest man in the world - has stifled competition in the market and harmed consumers by driving up prices. Pictured: Bezos with his fiance Lauren Sánchez
Once Target.com ended the sale, Amazon and other competitors would remain locked at the low price to keep matching each other.
The tactic helped Amazon to improve its margins and made them more than $1 billion in revenue, according to a source with the matter, the WSJ reported.
The company stopped using the algorithm in 2019, some employees said, though it remains unclear why.
The FTC lawsuit follows a four-year investigation into Amazon and is joined by 17 state attorneys general.
It was filed on Tuesday in federal court in Seattle, where amazon is headquartered.
Officials accused the Silicon Valley stalwart of anti-competitive practices such as pushing sellers into lowering prices on different websites.
They added that the company degrades the customer experience by replacing relevant search results with paid advertisements.
The FTC declined to comment on the redacted material in the complaint but spokesman Douglas Farrar told the Wall Street Journal: '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.'
![The FTC said that it was asking the court to issue a permanent injunction ordering Amazon to stop its unlawful conduct. Pictured: FTC chairwoman Lina M Khan](https://i.dailymail.co.uk/1s/2023/10/04/21/76133213-12590239-The_FTC_said_that_it_was_asking_the_court_to_issue_a_permanent_i-a-2_1696450109093.jpg)
The FTC said that it was asking the court to issue a permanent injunction ordering Amazon to stop its unlawful conduct. Pictured: FTC chairwoman Lina M Khan
But Amazon has so far shot back at allegations, claiming the FTC misunderstands how online pricing and competition works.
In a statement, lawyer David Zapolsky said on behalf of the company: '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.'
The original FTC filing also asked the court to consider forcing the online retailer to sell assets, hinting at a possible attempt to break up the online retail giant.
Many had wondered whether the agency would seek a forced break-up of the retail giant, which is also dominant in cloud computing and has a growing presence in other sectors like groceries and health care.
In a briefing with reporters, FTC Chair Lina Khan dodged questions of whether the agency will push for a break-up.
'At this stage, the focus is more on liability,' she said.
Amazon spokesman Tim Doyle told DailyMail.com: 'The FTC’s allegations grossly mischaracterize this tool. 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.'