FTC Alleges Amazon Used a Price-Gouging Algorithm

Photo: Tada Images (Shutterstock)
Photo: Tada Images (Shutterstock)
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Amazon faces allegations from the U.S. Federal Trade Commission (FTC) of wielding price-gouging algorithms through an operation called “Project Nessie” according to court documents filed Thursday. The FTC says the algorithm has generated more than $1 billion in excess profit for Jeff Bezos’s e-commerce giant.

Online stores match Amazon’s pricing to make sure they’re getting the market price for their product. Amazon allegedly used an algorithm from 2015 to 2019 to figure out which products were being price-matched and then raised the prices of these products, according to the FTC. This allowed Amazon to not be undercut by competitors while at the same time raising prices for the whole industry. The FTC alleges Amazon turns the algorithm, called Project Nessie, off during periods of heightened public scrutiny, but internally calls the operation “an incredible success.”

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The lawsuit also claims Amazon shuttered a service called ‘Seller Fulfilled Prime’ (SFP) in 2019, which allowed 15,000 sellers to ship products themselves, instead of using Fulfillment by Amazon. The program was praised by sellers, but created competitive fulfillment services, so Amazon shuttered the program to make all sellers reliant on Amazon for shipping, says the FTC.

Amazon counters the FTC’s statements, saying SFP was “far below the high standards and expectations our customers have for Prime” in a statement. An Amazon spokesperson called the FTC’s figures “misleading”, and says an improved version of SFP is now open to sellers.

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