The Chicago Journal

Amazon Algorithm Allegations: Unsealed Lawsuit Exposes Pricing Manipulation and Ad Revenue Tactics

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The Secret Algorithmic Pricing Tool: Project Nessie

In a recent development of the Federal Trade Commission (FTC) and 17 states’ lawsuit against Amazon for antitrust violations, a newly unsealed version of the lawsuit has shed light on a secret algorithmic pricing tool known as “Project Nessie.” This tool, according to the lawsuit, was allegedly used by Amazon to raise prices on products, ultimately forcing its retail competitors to follow suit. The unredacted portions of the suit further claim that this practice has cost US consumers over $1 billion.

Jeff Bezos’s Influence and the Shift Towards Ads

The unsealed lawsuit also revealed that Amazon’s founder, Jeff Bezos, personally directed a significant shift in the company’s e-commerce business strategy to prioritize advertisements. It was alleged that Amazon knowingly embraced ads that were not relevant to user searches, with the intention of increasing the platform’s revenues at the expense of customers. This strategic change in trajectory had a profound impact on Amazon’s business model.

Unveiling Amazon’s Enormous Scale and Influence

The unsealed portions of the complaint filed in Seattle federal court provide a wealth of previously undisclosed information about Amazon’s business operations. It disclosed that Amazon lists more than a billion unique products on its website, with third-party sellers accounting for a staggering 80% of the total catalog in 2020. Additionally, the document highlighted that over 70% of Amazon shoppers do not go beyond the first page of search results, showcasing the immense power of Amazon’s user interface.

Furthermore, the complaint revealed that nearly 98% of all purchases on Amazon are made through the highly visible “Buy Box” feature, which includes the “add to cart” and “buy now” buttons. This statistic underscores the significant influence that Amazon’s user interface has on a seller’s chances of running a successful business on the platform.

Additional Allegations: Hidden Communications and Monopoly Accusations

The unsealed filing also contained further allegations against Amazon. It claimed that Amazon executives had concealed their internal communications from regulators for at least two years by using the disappearing messages function of the encrypted messaging app Signal. This accusation raises concerns about transparency and cooperation with regulatory authorities.

The lawsuit itself stems from the accusations made by federal and state governments in September, claiming that Amazon operates as an illegal monopoly. This case serves as a litmus test for the Biden administration’s commitment to stricter competition enforcement.

In conclusion, the newly unsealed lawsuit against Amazon has revealed significant details about the alleged anticompetitive practices employed by the company. From the manipulation of prices through the secret algorithmic pricing tool to the strategic shift towards advertisements, these revelations shed light on Amazon’s business practices and raise important questions about its influence and compliance with regulations.