The Federal Trade Commission’s antitrust lawsuit against Amazon alleges, for the first time publicly, that the company used a secret pricing algorithm known internally as “Project Nessie” to compete unfairly in the e-commerce market.
Descriptions of the algorithm are blacked out extensively in the public version of the complaint, filed Tuesday morning in U.S. District Court in Seattle. An FTC spokesperson told GeekWire that the agency could not provide further details but raised the possibility of portions of the complaint being unredacted in the future.
“There is no valid and cognizable justification for Amazon’s use of Project Nessie,” the complaint says.
Visible portions of the complaint describe Nessie as a “pricing system,” “algorithm,” and a “scheme” that “belies its public claim that it ‘seek[s] to be Earth’s most customer-centric company.’ “
Amazon references its pricing practices and tools in an extended response to the FTC complaint, saying, in part:
“The FTC’s case alleges that our practice of only highlighting competitively priced offers and our practice of matching low prices offered by other retailers somehow lead to higher prices. But that’s not how competition works. The FTC has it backwards and 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.”
In the FTC complaint, unredacted sentences around the blacked-out Nessie descriptions include allegations of Amazon overcharging customers.
For example, the complaint reads, “Amazon’s Project Nessie has already extracted over [redacted] from American households,” and then adds in the subsequent paragraph, “In addition to overcharging its customers, Amazon is degrading the services it provides them.”
Project Nessie is referenced by name 16 times in the public version of the 172-page FTC filing. A dedicated subsection on Project Nessie spans nearly four pages.
We’ve contacted Amazon for comment on Project Nessie and the FTC allegations.
An Amazon blog post from 2018 described Nessie as “a system used to monitor spikes or trends on Amazon.com,” in addition to the name of a building at the company’s Seattle headquarters.
Addressing the complaint in general, Amazon said in an earlier statement that the “practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store.”
Update: Journalist and author Jason Del Rey has more details on Project Nessie from his recent book, “Winner Sells All,” about the Walmart-Amazon rivalry.
According to the book, “Amazon’s pricing tool would repeatedly lower the price on an item to match its competitor, leading to what insiders dubbed a death spiral.”
