Amazon 'Project Nessie' Tested How Much It Could Raise Prices

Highly redacted portions of the Federal Trade Commission’s monopoly lawsuit against Amazon refer to a project called "Nessie" that allowed the company to test how much it could raise prices in a way competitors would follow.

The algorithm helped Amazon improve its profit, recoup money, and improve margins on all types of items across shopping categories. The Wall Street Journalreports, citing people familiar with the allegation. When competitors did not raise prices to Amazon’s level, the algorithm — which is no longer in use — automatically returned the item to its normal price.

Amazon would match a discounted price from a competitor and other competitors would follow, lowering prices. When Target ended its sale, Amazon and the other competitors would remain at the low price because they were still matching each other, according to the WSJ, citing former employees who worked on the algorithm and pricing team. 



An Amazon spokesperson told the WSJ that the "FTC’s allegations grossly mischaracterize this tool.” The spokesperson said Project Nessie was a project used to try to stop the company's price matching from resulting in unusual outcomes where prices became so low that they were unsustainable.

The suit stated that this practice harmed both sellers and shoppers. Most sellers had to pay for advertising to reach Amazon's huge base of online shoppers, while shoppers consequently faced less relevant search results and were steered toward more expensive products. Notably, Amazon has increased not only the number of advertisements it shows, but also [redacted] because Amazon can extract billions of dollars through increased advertising despite worsening its services for customers.

The project ran for a few years on a subset of products, but did not work as intended, so Amazon scrapped it several years ago.

In the public version of the complaint, descriptions of the algorithm are blacked out. GeekWire initially pointed to the public complaint, which describes Nessie as a “pricing system,” “algorithm,” and a “scheme” that “belies its public claim that it ‘seek[s] to be Earth’s most customer-centric company.’"

An Amazon blog post from 2018 described Nessie as “a system used to monitor spikes or trends on,” GeekWire points out.

The Federal Trade Commission and 17 state attorneys general recently filed suit against Amazon, alleging the tech giant is a monopoly that abuses its power, which sounds incredibly similar to the suit filed against Google, also accused of abusing its power.

2 comments about "Amazon 'Project Nessie' Tested How Much It Could Raise Prices".
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  1. Michael Melone from Symmetri Marketing Group, October 4, 2023 at 4:29 p.m.

    Let's just consider it goes deeper than that.
    If you agree to fulfill through Amazon, and you are a using the vendor program, Google makes money by charging warehousing fees, estimated damage fees, they shift around the pricing (even if you are also a seller account) many times underbidding the actual product provider.

    In past, this equated to around a 45 - 55% COGS making it difficult to compete. We switched to an exclusive Seller model because we had warehousing that could handle it. 

  2. Laurie Sullivan from lauriesullivan, October 4, 2023 at 4:36 p.m.

    Thank you, Michael Melone, for taking the time to comment. I appreciate it. 

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