As the U.S. Joe Biden administration continues to keep a check on Big Tech (large-scale information technology companies), Amazon, against which the U.S. Federal Trade Commission (FTC) recently filed an anti-monopoly lawsuit, uses its algorithm to control product prices and loses KRW 1 billion. The Wall Street Journal (WSJ) reported on the 3rd (local time) that it was found that illegal profits amounting to $1.36 trillion were made.
According to WSJ, the FTC amended the complaint submitted to the court by adding that Amazon used the ‘Project Nessie’ algorithm to influence product prices. The FTC sued Amazon on the 26th of last month, claiming that Amazon was unfairly promoting its platform and services at the expense of online retailers who depend on it.
Project Nessie is an algorithm that helps determine the price increase by testing the extent to which competitors can match Amazon’s product prices. If competitors did not raise their prices to Amazon’s level, this algorithm would return the product price to the normal price. Amazon explained that this algorithm is a system used to monitor price spikes or trends on Amazon.
The FTC said the algorithm used its position as the world’s largest e-commerce company to encourage Amazon to raise product prices across the industry and charge customers more. In particular, the algorithm also contributed to Amazon’s excess profits. One source told WSJ that Amazon made $1 billion in profits using the algorithm. WSJ analyzed, “This algorithm helped Amazon increase profits across shopping items.”
Amazon countered, saying, “Project Nessie was a project with the simple purpose of preventing price matching from becoming too low and resulting in abnormal outcomes that were unsustainable,” and added, “It did not work as intended, so we scrapped it a few years ago.” However, the FTC said, “Amazon has allowed its inflated product prices to be used as a price floor for all other competitors,” and added, “We once again urge Amazon to eliminate its illegal monopoly practices.”
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.