A newly disclosed policy analysis report accuses Amazon of utilizing pricing systems, including "anti-discount" strategies and a secret algorithm called "Project Nessie," to influence competitor pricing algorithms and thereby inflate product prices across the entire market.
According to previously unsealed litigation documents from the U.S. Federal Trade Commission, the algorithm, codenamed "Nessie," could precisely identify specific products for which other online stores would follow Amazon's price increases. Once activated, the algorithm would raise the prices of these items. After other retailers matched the higher prices, Amazon was able to sustain them. It is reported that this project generated over $1.4 billion in additional profit for Amazon between 2016 and 2018.
Beyond initiating price hikes, Amazon also employed an "anti-discount" algorithm. Analysis in the report suggests this algorithm was designed to avoid a state of "perfect competition." It would immediately match competitors' price changes but never undercut them. This prevented other retailers from attracting Amazon's customers through discounts, ultimately causing competing algorithms to abandon price reductions and instead follow Amazon in raising prices.
Amazon has defended these tools, arguing they were intended to "prevent unsustainable low prices resulting from price matching" and claiming the "Project Nessie" initiative was discontinued years ago due to poor performance. However, related evidence indicates that Amazon's algorithms shaped the pricing logic of the entire market, leading consumers to unknowingly bear higher shopping costs.
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