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Shoppers struggling to find what they want in the clutter of Amazon advertising may have a new culprit: Amazon founder Jeff Bezos.
Previously redacted portions of the Federal Trade Commission’s antitrust lawsuit against Amazon, released Thursday, allege that Bezos directed Amazon executives to allow inaccurate search results to boost advertising revenue.
“Amazon not only increased the number of ads displayed, but also increased the number of irrelevant junk ads, referred to internally as ‘defects,'” the lawsuit states in newly released portions. “Mr. Bezos instructed his executives: “[a]“Accept more defects” because Amazon can rake in billions of dollars through increased advertising even as its services to customers deteriorate.”
The lawsuit also claims that “Amazon executives admit internally that this causes ‘harm to consumers’ because it makes ‘nearly impossible for high-quality, helpful organic content to win over barely relevant sponsored content.'”
An Amazon spokesman did not immediately respond to a request for comment. Bezos owns the Washington Post and its interim CEO Patty Stonesifer sits on the board of Amazon.
The FTC filed its long-awaited lawsuit against Amazon in September, surprising the industry by arguing that Amazon is effectively raising prices for consumers by charging merchants to advertise on its digital marketplace. FTC Chairwoman Lina Khan made a stir in antitrust law with her 2017 essay “Amazon’s Antitrust Paradox,” published while she was a law student at Yale. But the case she is making against Amazon today is markedly different from the argument she made six years ago.
The allegations that Bezos would knowingly harm the Amazon search experience for customers are surprising given the billionaire’s much-touted obsession with delighting customers. At Amazon, all employees must practice “customer obsession,” which, according to corporate governance principles, means they must “start with the customer and work backwards.”
However, in its complaint, the FTC says Amazon executives realized they could make more money by increasing the number of ads, even if those ads degraded the quality of search results and hurt the customer experience.
The original version of the FTC lawsuit was heavily redacted. The agency’s legal team struggled for weeks to make more of its claims public.
At the heart of the case against Amazon is the argument that Amazon unfairly gained market dominance through the use of algorithms to automatically adjust prices to competitors.
One of the algorithms the FTC claimed Amazon used to achieve this goal was codenamed “Project Nessie.” Previously redacted lines in the complaint say that Nessie – which allegedly identified products on which Amazon could raise prices and expected competitors to follow suit – earned Amazon “$1 billion in excess profits.”
In an emailed statement, Amazon spokesman Curtis Eichelberger said the FTC is “grossly mischaracterizing” Nessie because, in his opinion, Amazon stopped using Nessie several years ago.
“Nessie was used to prevent our price adjustment from producing unusual results where prices became so low that they were no longer sustainable,” Eichelberger said. “The project ran for a few years with a subset of products, but did not work as intended.”
In its lawsuit, the FTC said there are “no technical barriers to Amazon reviving or even expanding use of Project Nessie,” and said the company only considered using its “old friend Nessie” in January 2022.
New details from the lawsuit also reveal more information about how Amazon allegedly controls sellers on its marketplace to limit competition. For example, Amazon enforces strict standards for sellers that make it difficult to sell anywhere else, the lawsuit says.
The FTC also claims that Amazon discourages sellers from handling shipping and logistics themselves, even if they are as fast as Amazon, because Amazon didn’t want to outsource business to competitors like UPS.
According to the lawsuit, sellers met their delivery speed goals 95 percent of the time in 2018 without Amazon’s help. As a result, “Amazon executives” feared that allowing sellers to handle their own logistics “could enable competitors to ship quickly,” the lawsuit says.
According to the FTC, concern at Amazon was so great that “the CEO of Amazon Worldwide Operations wrote that he was ‘losing’ [his] after we learned that UPS had advertised that its online retail fulfillment service could deliver Prime-eligible orders.”
The Amazon spokesperson said the newly published claims were misleading and that sellers independently ship significantly slower than Amazon.