In September, the US Federal Trade Commission filed a long-awaited anti-trust lawsuit against mega online retailer Amazon.
Much of the lawsuit was originally redacted, but recently, more details have emerged around the e-commerce giant’s utilization of a pricing algorithm to quietly hike prices on certain items.
While pricing algorithms are commonly used today, the lawsuit alleges that Amazon’s algorithm was used to artificially inflate some items that it predicted were most likely to be matched by competitors.
In other words, Amazon used its 77% market share to price fix knowing that other vendors were closely watching its pricing and would compete accordingly.
The algorithm, called “Project Nessie,” was allegedly used for price fixing and earned the company more than a billion extra dollars before it was turned off several years ago as regulators began investigations.
The company turned the algorithm on and off depending on the situation when testing began as far back as 2010.
When more media attention was focused on Amazon, such as around Prime Day sales events, the company would allegedly shut down “Project Nessie” only to roll it back out when the site was under less scrutiny.
The lawsuit also alleges that the company sought to hide its tactics by destroying communications on the topic and using disappearing messaging features for instant messaging.
Amazon denies any wrongdoing, with Amazon spokesperson Tim Doyle saying that the lawsuit doesn’t accurately represent the use of the algorithm.
Doyle added, “Nessie was used to try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable.”
This lawsuit is being closely watched by many because the decision, when it comes, will set the precedent for the use of technology for price fixing.