Amazon has come under scrutiny as the Federal Trade Commission (FTC) filed a long-anticipated antitrust lawsuit against the company in September. This lawsuit alleges that Amazon employed illegal tactics to stay at the top of the e-commerce industry. Although details of the suit were initially kept from the public, today, a mostly unredacted version has been released, shedding light on Amazon’s secret pricing tool known as Project Nessie, which, the FTC claims, contributed to price increases of over $1 billion over two years.
While Amazon has argued that its dominance in the online retail space benefits small businesses by granting them access to a broader consumer base, the FTC asserts that the company’s approach has grown exploitative over the years. Amazon’s continuous rise in third-party seller fees has taken a toll on smaller businesses, even pushing some into bankruptcy. Despite Amazon’s previous assertions that these claims were without merit, the unredacted documents disclosed today paint a different picture.
According to The Wall Street Journal, the internal documents cited in the initial complaint reveal that Amazon executives were well aware of the consequences of the company’s policies. These policies, which included compelling Amazon sellers to offer the lowest online prices or face repercussions, were deemed to have a “punitive aspect.” One executive acknowledged that many sellers “live in constant fear” of Amazon penalizing them for failing to adhere to the ever-evolving pricing policy.
The FTC’s allegations also include claims that Amazon monitored its sellers and punished them if they offered lower prices on other platforms, which, the agency contends, violates antitrust laws. The unredacted documents indicate that Amazon employed secret price gouging algorithms under Project Nessie, resulting in price increases exceeding $1 billion from 2016 to 2018. Furthermore, the “take rate,” denoting the amount Amazon receives from sellers using the Fulfillment By Amazon logistics program, rose from 27.6 percent in 2014 to 39.5 percent in 2018. Whether this percentage has changed in more recent years remains unclear as those figures remained redacted.
Amazon’s impact extends beyond its sellers’ experiences. The FTC’s complaint reveals the company’s intensified use of ads in search results. Several Amazon ad executives acknowledged that these sponsored ads often proved irrelevant to the initial search, causing “harm to consumers” and negatively affecting the overall site experience.
The FTC contends that these policies were conceived by Amazon’s founder and former CEO, Jeff Bezos, with the aim of boosting the company’s profit margins. The complaint alleges that Mr. Bezos directly instructed his advertising team to increase the number of ads on Amazon by permitting more irrelevant advertisements, as the revenue generated from ads outweighed the revenue loss resulting from a degraded shopping experience for consumers.
