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Amazon has been sued by the FTC for bilking everyone out of a billion dollars.

The U.S. Federal Trade Commission (FTC) has accused Amazon of employing a series of illegal tactics to inflate profits for its online retail empire, including an algorithm that has allegedly raised prices for U.S. households by over a billion dollars and increased costs for sellers.

The FTC states that Amazon used a project codenamed "Nessie" between 2015 and 2019, which could predict whether other online stores would follow Amazon’s price increases, thereby inflating prices on the Amazon platform.

In simple terms, competitors would reference Amazon’s prices, and if their own were too low, they would raise them, which is understandable. Amazon reportedly exploited this by intentionally raising the prices of some products so that competitors would follow suit, leading to a general increase in prices.

FTC documents indicate that the sole purpose of the "Nessie" project was to manipulate other online stores to increase prices, further inflating consumer costs. Without Amazon's use of Nessie, consumers could have kept more money in their pockets.

From 2016 to 2018, this algorithm reportedly generated over a billion dollars in excess profits for Amazon. This figure does not account for the additional amounts consumers paid on other platforms due to the Nessie plan, which could be "much higher."

The algorithm typically ran continuously, but Amazon would pause the Nessie project during the holiday shopping season and Prime Day due to increased media attention and customer traffic. After public attention shifted elsewhere, Amazon would restart and expand the Nessie project to compensate for the pause.

Amazon also harmed consumers by flooding its online marketplace with irrelevant ads, indirectly raising consumer prices and significantly increasing its advertising revenue.

Jeff Bezos, then CEO, directed his deputies in 2014 to “go big” with advertising and in 2016 to expand the company's ad business by showing more irrelevant ads to consumers.

The lawsuit also claims that in 2019, Amazon shut down a service called "Seller Fulfilled Prime" (SFP), which allowed over 15,000 sellers to ship delivery order products themselves without using Amazon's delivery. This service was praised by sellers but posed a threat to Amazon's own delivery, prompting Amazon to terminate the program and force all sellers to rely on Amazon's delivery for shipping.

The FTC notes that the average fee Amazon charged sellers using its delivery service increased from 27% in 2014 to 39.5% in 2018.

The FTC also points out in the complaint that Amazon does not allow other large online stores, like Walmart, to sell on its platform. It quotes an Amazon seller who said that Amazon enforced a policy to pressure them to "absolutely ensure that our product prices on Walmart are not lower than our sales prices on Amazon."

Additionally, the FTC accuses Amazon of using the disappearing message feature of the Signal app to hide operational information from law enforcement and alleges that the company destroyed related communication records from June 2019 to early 2022.

Signal is an application developed by Open Whisper Systems, noted for its encrypted messaging, which ensures end-to-end encryption for any text, video, and images sent by users.

The FTC, along with 17 states, has sued Amazon for antitrust violations, resulting in the public disclosure of the above lawsuit contents. Amazon's lawyers have denied the allegations, and the matter is ongoing.

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