What: US antitrust regulators allege that Amazon generated over USD 1 billion in extra profit through a secret algorithm called "Project Nessie”, according to the FTC.

Why it is important: The lawsuit is part of the Biden administration's efforts to challenge Big Tech's market power and represents a crucial test for FTC Chair Lina Khan's approach to antitrust enforcement.

The algorithm was used to control pricing on Amazon's platform and across the market. When other online stores tried to match Amazon's prices, the algorithm would raise the prices of certain goods and keep them higher even after other platforms followed suit.

The Federal Trade Commission also accused Amazon of strategically deactivating the algorithm during periods of heightened scrutiny. The FTC complaint further states that Amazon founder Jeff Bezos directed executives to increase "pay to play advertisements" on the platform, including less relevant ads known as "defects," which harmed consumers. Amazon's advertising revenue has since increased to USD 37.8 billion globally in 2022.

Amazon earned USD 1bn from secret pricing algorithm, FTC alleges