Antitrust regulators say Jeff Bezos approved making Amazon search worse

“Amazon has increased not only the number of advertisements it shows, but also the number of irrelevant junk ads, internally called ‘defects,’” newly public portions of the lawsuit say. “Mr. Bezos instructed his executives to ‘[a]ccept more defects’ because Amazon can extract billions of dollars through increased advertising despite worsening its services for customers.”

The suit also alleges that “Amazon executives internally acknowledge this creates ‘harm to consumers’ by making it ‘almost impossible for high quality, helpful organic content to win over barely relevant sponsored content.’”

Tim Doyle, an Amazon spokesman said in response: “Amazon works hard to make it fast and easy for customers to find the items they want and discover similar options by providing a mix of organic and sponsored search results based on factors including relevance, reviews, availability, price, and speed of delivery, along with helpful search filters to refine their results.”

Bezos owns The Washington Post, and its interim CEO, Patty Stonesifer, sits on Amazon’s board.

The FTC filed its long-awaited suit against Amazon in September, surprising the industry by arguing that Amazon effectively raises prices for consumers by charging merchants fees to advertise in its digital marketplace. FTC Chair Lina Khan made a splash in antitrust with her 2017 paper “Amazon’s Antitrust Paradox,” published when she was a law student at Yale. But the case she’s making against Amazon today is notably different from the argument she made six years ago.

The allegations that Bezos would knowingly degrade 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 leadership principles, means they must “start with the customer and work backwards.”

But, in its complaint, the FTC says Amazon executives saw they could make more money by increasing the number of ads, even if those ads worsened the quality of search results and harmed the customer experience.

The initial version of the FTC’s lawsuit was heavily redacted. The agency’s legal team fought for weeks to make more of its claims public.

At the core of the case against Amazon is the argument that by using algorithms to automate price matching to competitors, Amazon gained market dominance unfairly.

One of the algorithms the FTC alleges Amazon used to accomplish that goal was code-named “Project Nessie.” Previously redacted lines in the complaint say Nessie — which allegedly identified products Amazon could raise prices on and expect competitors to follow suit — netted Amazon “$1 billion in excess profit.”

In an email statement, Amazon spokesperson Curtis Eichelberger said the FTC “grossly mischaracterizes” Nessie, which he said Amazon stopped using several years ago.

“Nessie was used to try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable,” Eichelberger said. “The project ran for a few years on a subset of products, but didn’t work as intended.”

In its suit, the FTC said there are “no technical barriers to Amazon resurrecting — or even expanding — its use of Project Nessie,” and said the company had considered using its “old friend Nessie” as recently as January 2022.

New details from the suit also reveal more information about how Amazon allegedly exerts control over sellers in its marketplace in order to reduce competition. For example, Amazon enforces strict standards for sellers that make it difficult to sell anywhere else, the suit says.

The FTC also alleges that Amazon discourages sellers from handling their own shipping and logistics even when they’re just as fast as Amazon because Amazon didn’t want to drive business to competitors like UPS.

According to the suit, sellers achieved their delivery speed goals 95 percent of the time in 2018 without Amazon’s help. As a result, “Amazon executives worried” that allowing sellers to handle their own logistics could “enable competitors to ship fast,” the suit says.

The concern was so great within Amazon, according to the FTC, that “Amazon’s CEO of Worldwide Operations wrote that he was ‘losing [his] mind’ after learning that UPS was advertising that its online retail fulfillment service could fulfill Prime-eligible orders.”

The Amazon spokesperson said the newly public allegations are misleading and that sellers shipping independently were significantly slower than Amazon.