The Federal Trade Commission (FTC) sued Amazon last week, accusing the digital behemoth of maintaining an unlicensed monopoly. Although a sizable section of the lawsuit was redacted, The Wall Street Journal recently published important information about a top-secret algorithm known as “Project Nessie” that is said to have assisted Amazon in growing its income by more than $1 billion.
Project Nessie, as alleged by the FTC, was designed to manipulate rivals’ weaker pricing algorithms, compelling competitors to set higher prices. This alleged activity resulted in improved profits for Amazon and discouraged its competitors from offering lower prices. Amazon purportedly used its extensive surveillance network to inhibit price competition, artificially inflating prices both on and off its platform.
Amazon has since denied these allegations, asserting that Project Nessie’s purpose was to prevent unsustainable low prices resulting from price matching. The company stated that the project did not work as intended and was discontinued several years ago.
The FTC alleges that Amazon’s actions have stifled competition on price, impacting billions of dollars in retail sales annually and affecting millions of consumers. Experts have supported these claims, warning that dominant firms utilizing sophisticated pricing algorithms can manipulate competitors and influence market prices to the detriment of consumers.
The FTC’s complaint has raised concerns about the need for increased transparency and accountability in regulating pricing algorithms. Experts have advocated for further studies and collaboration between academics and policymakers to address the risks associated with anticompetitive practices such as adversarial collusion and algorithmic pricing.
To successfully monitor and control pricing algorithms, regulators in the US, the EU, and the UK may need to reexamine present competition rules and offer more precise recommendations. To maintain fair competition and safeguard consumers from possible market manipulation, internet sellers must be transparent and accountable.
As this lawsuit develops, it may establish a precedent for how online marketplaces are governed, potentially altering the competitive environment and defending the rights of consumers.