The Seattle Times is reporting this afternoon that Amazon executives "allegedly destroyed two years of communications that the Federal Trade Commission requested as part of its antitrust investigation into the company, according to legal documents made public Thursday."
In addition, the Times story says, "Amazon executives knowingly deployed practices that would avoid a 'perfectly competitive market' or changed tactics when it realized Amazon could lose its competitive advantage, the FTC alleged in newly unsealed sections of its lawsuit against Amazon. Amazon also switched course on a controversial algorithm that the FTC alleges raises prices for consumers during periods of 'heightened outside scrutiny'."
The details in the Times story come as the FTC refiled its original complaint, this time with far fewer redactions than in the version initially filed.
The Times notes that "the complaint, filed in federal court in Seattle, was originally heavily redacted. Entire paragraphs … were covered with large black boxes as the FTC gave Amazon a chance to argue in court that some of the agency’s findings included proprietary information that should not be released to the public. That information 'could harm Amazon’s standing in the highly competitive retail environment,' attorneys for the company wrote in court records.
"After both parties agreed on what information should remain under seal and what should not, the FTC refiled its complaint Thursday. Amazon asked the court to keep portions of about 60 paragraphs redacted. The 172-page complaint has more than 500 paragraphs in total.
"The refiled complaint sheds more light on Amazon’s business practices, including the company’s philosophy around advertisements on its digital storefront, its services for third-party sellers and its tactics for keeping track of competitors’ prices. It also highlights how Amazon discussed those practices internally, including several instances where the FTC accuses Amazon executives of knowingly degrading the customer experience by raising prices and making it harder to search for certain products."
The Wall Street Journal writes that "one of the tactics that the FTC alleged Amazon used that raised prices was a secret algorithm called “Project Nessie.” In the original version of the complaint, nearly the entire section on the algorithm was redacted, but the Wall Street Journal learned that the FTC alleged that Amazon used the algorithm to test how much it could raise prices in a way that competitors would follow, resulting in customers paying higher prices even if they weren’t shopping on Amazon.com.
"The new unredacted portions show that Amazon used the algorithm between 2015 and 2019, and the FTC says that 'Amazon repeatedly paused Project Nessie when it grew concerned that the public might detect the higher prices Project Nessie produced.' It says that the 'sole purpose' of the algorithm was to raise prices for consumers.
"Citing Amazon internal documents, the FTC says that between 2016 and 2018, the algorithm generated more than $1 billion in additional profit for Amazon. The FTC says that in 2017, 'Amazon broadened its use of Project Nessie to help close a projected $450 million shortfall in operating profits'."
The Journal also writes that "the complaint details the company’s proliferation of advertisement placements in search results to the detriment of the shopper experience. Many of the ads Amazon executives acknowledged were irrelevant to search queries and created 'harm to consumers,' according to one Amazon executive. Jeff Bezos, Amazon’s founder and former chief executive, instructed his team to accept higher rates of irrelevant ads in search queries, as the ads were high margin, the FTC complaint says.
"'Mr. Bezos directly ordered his advertising team to continue to increase the number of advertisements on Amazon by allowing more irrelevant advertisements, because the revenue generated by advertisements eclipsed the revenue lost by degrading consumers’ shopping experience,' the complaint alleges."
The Washington Post quotes Amazon spokesperson Tim Doyle as saying that the FTC’s claim was “baseless and irresponsible," and that Amazon went above and beyond in providing the FTC with everything it requested.
- KC's View:
(Yes, I know I said I was taking a long weekend. But I didn't want to wait until Monday to report and comment on this.)
First of all, it is no wonder that Amazon wanted this stuff redacted. While I think there is a legitimate discussion to have about how many of these actions are illegal, versus just being not particularly ethical or consumer-friendly, the look is not a good one.
Project Nessie, at least as much as I know about it, doesn't seem all that horrible to me. Yes, Amazon was trying to drive more profit and sales. yes, it wanted to have a pricing advantage over its competitors and was willing to play hardball to maintain it. And yes, it was willing to change prices regularly, doing high-tech price checks on competitors to figure out where the soft spots were.
Every retailer worth its salt does those things. Amazon may just be bigger and better than everyone else.
But if the FTC actually has documents that prove Jeff Bezos was willing to degrade the customer experience to generate more profit, that will work against the Bezos myth and mystique. I'm one of those customers who believes that the Amazon experience is not what it once was, but, naïvely perhaps, I was willing to blame Andy Jassy. But maybe that assignment of blame was misplaced.
If part of the FTC's game plan is to do damage to Bezos' image, it may well succeed if these documents are accurate.
I'm also appalled by the possibility that Amazon may have deleted documents that the FTC had legitimately demanded. Again, these are still just allegations - but if there is proof, the fines ought to be sizeable (which by Amazon standards ought to be really sizable), and maybe somebody should go to jail (if the criminal code allows for such a thing.)
In a private investment, Bezos owns the Washington Post. He engineered a new slogan for the paper: "Democracy dies in darkness."
It would be ironic indeed if Amazon, either under Bezos' direction or with his knowledge, engaged in this kind of behavior. But he wouldn't be the first mogul to decide that the rules don't apply to him.
It seems to me that this stuff just got real.