Amazon (NASDAQ:AMZN) employed a concealed algorithm that effectively inflated prices on external websites while erasing internal communications during the Federal Trade Commission (FTC) investigation, according to recently unveiled unredacted segments of the FTC’s antitrust lawsuit against the e-commerce giant. The excerpts suggest Amazon executives deliberately deleted messages using Signal, a popular app, potentially destroying over two years’ worth of communication despite the FTC’s instructions not to do so.

In response, Amazon spokesperson Tim Doyle refuted the FTC’s claims, stating that the allegations were unfounded and irresponsible. He explained that Amazon voluntarily revealed its use of Signal among employees to the FTC, collected conversations from employees’ phones, and allowed agency personnel to inspect the conversations, even those unrelated to the FTC’s investigation.

The FTC, along with 17 states, filed a lawsuit against Amazon in September, accusing the company of exploiting its marketplace dominance to inflate prices both on and off its platform, overcharge sellers, and stifle competition. The lawsuit alleges violations of federal and state antitrust laws, although Amazon has mounted a robust defense of its business practices.

This antitrust case represents a significant government effort to curb Amazon’s market power and coincides with the FTC’s more assertive stance against tech companies.

The newly disclosed unredacted portions of the lawsuit also provide additional insight into a previously discussed algorithm, known as “Project Nessie.” The FTC’s excerpts reveal that Amazon used this tool to identify products that would maximize its profits, enabling the company to predict where it could raise prices and prompt other shopping sites to follow suit. Amazon activated Nessie to increase prices on select items, and once other websites complied, it maintained the elevated prices. According to the FTC, the use of Nessie resulted in over $1 billion in excess profits for Amazon.

Aware of the potential public backlash, Amazon has switched Project Nessie on and off during periods of increased external scrutiny. The FTC claimed that Amazon deployed Nessie in 2014 and toggled it on and off at least eight times between 2015 and 2019. In 2018 alone, Amazon utilized the algorithm to set prices for items viewed over 400 million times by shoppers.

Regulators contend that although Amazon claims the algorithm is currently paused, the company considered conducting experiments in 2020 and 2021 to enhance Nessie’s effectiveness. Amazon’s spokesperson, Doyle, characterized Nessie as an “outdated” pricing algorithm that the agency has “grossly” mischaracterized.

In addition, the unredacted portions of the lawsuit shed more light on Amazon’s advertising business. The agency asserted that then-CEO Jeff Bezos directed executives to accept more low-quality ads, internally referred to as “defects,” because increased advertising could generate higher revenue, even if they were a nuisance for consumers.

Featured Image: Unsplash @ Christian Wiediger

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