FTC vs. Amazon: New Claims and Allegations Revealed

FTC vs Amazon

The ongoing battle between the Federal Trade Commission (FTC) and Amazon has taken a new turn with the recent filing that reveals more claims about Jeff Bezos’ alleged role and an intriguing project known as “Project Nessie.” These claims provide insight into the tactics employed by Amazon and shed light on the company’s pricing strategies. In this article, we will explore the newly unredacted details from the complaint filed by the FTC and delve into the allegations made against Amazon.

1. Jeff Bezos’ Alleged Role

The newly unredacted filing exposes Jeff Bezos’ alleged behind-the-scenes involvement in the tactics that form the basis of the FTC complaint. The document suggests that Bezos played a significant role in shaping Amazon’s strategies, particularly regarding pricing and advertising. It reveals that Bezos directed the shift from prioritizing relevant, organic search results to incorporating pay-to-play advertisements on Amazon’s online storefront. This shift has had a detrimental impact on both consumers and sellers, as it makes it difficult for high-quality, organic content to compete with sponsored content.

2. Project Nessie: The Price Inflation Scheme

One of the most significant revelations from the filing is the existence of “Project Nessie,” a covert operation by Amazon to raise prices. The unredacted details confirm the government’s interpretation of Project Nessie as a scheme explicitly intended to inflate the prices that shoppers pay. The filing alleges that Project Nessie has already extracted over a billion dollars from American households, much to the detriment of sellers and shoppers alike.

3. Amazon’s Increasing Fees and Costs

The FTC filing also highlights Amazon’s recognition of the increasing difficulties faced by sellers in being profitable on the platform. The document states that sellers have found it more challenging over time due to Amazon’s increasing fees and costs. This acknowledgment by Amazon further supports the claims made by the FTC regarding the company’s anti-competitive practices.

4. Amazon’s Manipulation of Search Results

The filing reveals that Amazon’s manipulation of search results is not solely driven by algorithms but is a deliberate strategy guided by Jeff Bezos himself. The document alleges that under Bezos’ direction, Amazon shifted its focus from relevant, organic search results to prioritizing pay-to-play advertisements. This practice has led to harm for consumers, as it makes it almost impossible for high-quality, helpful organic content to win over barely relevant sponsored content.

5. Amazon’s Algorithm to Deter Price Competition

According to the filing, Amazon has implemented an algorithm specifically designed to deter other online retailers from offering lower prices. The algorithm, conceived by Jeff Wilke, Amazon’s former CEO of its Worldwide Consumer business, is aimed at preventing a “perfectly competitive market” where participants lower their prices to a competitive level. Instead of engaging in direct competition, Amazon adopts a “game theory approach,” rapidly copying the moves of its rivals to prevent price cuts and discounts from translating into greater scale. This conduct is intended to deter rivals from attempting to compete on price, ultimately leading to higher prices for consumers.

6. Project Nessie: Hiking Prices and Covert Operations

The filing reveals that Project Nessie goes beyond anti-discounting tactics and involves outright price hikes. Amazon created the secret algorithm known as Project Nessie to identify specific products for which it predicts other online stores will follow Amazon’s price increases. When activated, this algorithm raises prices for those products, and when other stores follow suit, the higher price is maintained. Project Nessie has been deemed “an incredible success,” generating over $1 billion in excess profit for Amazon. The filing also suggests that Amazon turns off Project Nessie during periods of heightened scrutiny, only to reactivate it later when it believes it is no longer under observation.

7. Amazon’s Efforts to Suppress Multihoming

The FTC complaint also alleges that Amazon has made efforts to suppress products when sellers engage in “multihoming,” offering items across multiple e-commerce platforms. The filing suggests that Amazon recognized the potential threat of increased competition when it temporarily relaxed its coercive conduct. However, the company soon realized that this decision could enable greater multihoming, which would fundamentally weaken its competitive advantage. This realization led to Amazon taking measures to impede multihoming and prevent sellers from running their own warehouses and enabling other marketplaces with inventory.

8. Amazon’s Deletion of Internal Communications

The filing reveals that Amazon has intentionally deleted internal communications using disappearing message features, specifically the Signal messaging app. The company has destroyed more than two years’ worth of such communications, despite being instructed by the FTC not to do so. This deliberate destruction of internal communications prejudicially obstructs the government’s investigation into Amazon’s operations.

9. Seller Fulfilled Prime vs. Fulfillment By Amazon

The newly unredacted complaint includes an extensive section on Amazon’s alleged concerns regarding its Seller Fulfilled Prime (SFP) program. The filing suggests that Amazon feared SFP could seriously imperil its Fulfillment By Amazon (FBA) program. Amazon executives were concerned that SFP could enable competitors to ship fast and benefit other retailers. As a result, Amazon made the decision to stop new enrollment in SFP, despite knowing that this would harm its shoppers by reducing the number of Prime-eligible offers available and slowing overall shipping speeds.

10. The Impact of Conditioning Prime Eligibility

The filing suggests that Amazon’s conditioning of Prime eligibility on the use of Fulfillment By Amazon is not necessary to ensure quality shipping. Internal analyses conducted by Amazon showed that sellers using independent fulfillment services met Amazon’s stringent Seller Fulfilled Prime standards more often than sellers fulfilling orders themselves. Therefore, Amazon’s decision to impede the growth of independent fulfillment providers by shutting down SFP appears to be motivated by a desire to exclude rivals and foreclose competition, rather than genuinely improving shipping speeds.

11. The Backlash Against Seller Fulfilled Prime

The filing reveals that Amazon faced backlash when it temporarily relaxed its coercive conduct regarding Seller Fulfilled Prime. The decision to allow sellers to fulfill their own products while still obtaining the Prime badge was popular with both shoppers and sellers. However, internally, Amazon realized that this could enable greater multihoming and competition. As a result, the company chose to prioritize excluding rivals and foreclosing competition, even if it came at a cost to the customers.

12. Amazon’s Extensive Efforts to Hide Information

The filing accuses Amazon of impeding the government’s investigation and deliberately hiding information about its internal operations. Amazon executives intentionally deleted internal communications and destroyed more than two years’ worth of messages, despite being explicitly instructed not to do so by the FTC. These actions by Amazon are seen as prejudicial and obstructive to the investigation.

In conclusion, the filing in the FTC vs. Amazon case reveals new claims and allegations about Jeff Bezos’ alleged role and sheds light on Amazon’s pricing strategies. The unredacted details highlight the company’s manipulation of search results, the existence of Project Nessie, and efforts to suppress multihoming. The filing also accuses Amazon of deliberately deleting internal communications and obstructing the investigation. As the case unfolds, it will be interesting to see how the allegations are addressed and what impact this will have on Amazon’s business practices.

See first source: Geekwire

FAQ

What is the essence of the FTC’s complaint against Amazon?

The FTC has filed a complaint against Amazon highlighting alleged anti-competitive practices, manipulation of search results, and a price inflation scheme known as “Project Nessie” spearheaded by the company.

What role did Jeff Bezos allegedly play in Amazon’s tactics?

Jeff Bezos is alleged to have played a significant role in shaping Amazon’s pricing and advertising strategies, specifically shifting the focus from organic search results to pay-to-play advertisements on Amazon’s platform.

Can you tell me more about “Project Nessie”?

Project Nessie is alleged to be a covert operation by Amazon to inflate prices, extracting over a billion dollars from American households, according to the FTC filing.

How has Amazon’s fee structure impacted sellers?

The filing highlights that sellers find it increasingly challenging to remain profitable on Amazon due to rising fees and costs, which is acknowledged by Amazon.

What manipulation of search results is Amazon accused of?

Amazon is accused of shifting its focus from relevant, organic search results to prioritizing pay-to-play advertisements, allegedly under Jeff Bezos’ direction, making it hard for organic content to compete with sponsored content.

How does Amazon’s algorithm deter price competition?

Amazon is alleged to have an algorithm designed to deter other online retailers from offering lower prices, adopting a “game theory approach” to prevent price cuts and discounts from translating into greater scale.

What are the allegations regarding Amazon’s suppression of multihoming?

The FTC alleges that Amazon has taken measures to impede multihoming, preventing sellers from offering items across multiple e-commerce platforms, and obstructing their ability to run their own warehouses.

What claims are made about Amazon’s deletion of internal communications?

Amazon is accused of intentionally deleting over two years’ worth of internal communications using disappearing message features, despite FTC instructions, obstructing the government’s investigation.

What concerns were raised regarding Seller Fulfilled Prime (SFP) and Fulfillment By Amazon (FBA)?

The filing suggests Amazon feared SFP could imperil FBA, and stopped new enrollment in SFP, despite knowing this would reduce Prime-eligible offers and slow shipping speeds, to exclude rivals and foreclose competition.

Featured Image Credit: Photo by Ian Hutchinson; Unsplash РThank you!