FTC Claims Amazon Doubled Number Of Ads In Search Results—And Deleted Internal Messages To Evade Federal Probe

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Amazon allegedly doubled the number of advertisements in search results, and company executives deleted internal communications to prevent a probe by regulators, according to a less-redacted complaint released Thursday by the Federal Trade Commission, amid a landmark lawsuit from the agency alleging Amazon illegally protected a monopoly in online retail.

The agency alleges Amazon executives “systematically and intentionally deleted” more than two years … [+] of internal communications.

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Key Facts

The FTC said Amazon doubled the percentage of instances in which a desktop search result would result in an advertisement in 2017, and more than quintupled the percentage for mobile search results—a move the FTC said made it harder for shoppers to find products and often steered them toward high-priced items.

The practice also “punishes” sellers offering lower prices on the site and with other online retailers because “many sellers set their price on Amazon … as the price floor across the internet,” according to the FTC.

Some Amazon executives allegedly said the company would be “crazy not to” increase the number of advertisements shown to customers, with “advertisements being so profitable” for the company, the agency said.

Another executive collected examples of how the increased number of advertisements would affect customers, the FTC claims, including one instance in which buck urine products would show up in a search for water bottles.

The FTC also claims that, between June 2019 to early 2022, Amazon executives “systematically and intentionally deleted” international communications while using the messaging app Signal in an effort to “impede” an investigation by federal officials and “hide information about its internal operations.”

An Amazon spokesperson told Forbes the FTC’s claims about executives deleting messages are “baseless and irresponsible,” adding that the company disclosed its employees’ use of Signal and allowed the agency to inspect messages that were “painstakingly collected” even if “they had nothing to do with the FTC’s investigation.”

Tangent

The FTC’s complaint claims that “Project Nessie,” a secret algorithm allegedly used by Amazon to determine how to raise prices in a way that competitors would follow, generated more than $1 billion in excess profit for the company. The FTC says Amazon stopped the project because the company became “aware of the public fallout it risks.” Amazon spokesperson Tim Doyle said the agency’s allegations “grossly mischaracterize this tool,” adding “Project Nessie” was used to “try to stop our price matching from resulting in unusual outcomes where prices became so low that they were unsustainable.” The project didn’t work as intended and was scrapped several years ago, Doyle said.

Key Background

The FTC and 17 states filed a lawsuit in September against Amazon, alleging the online retailer is a “monopolist” that uses a “set of interlocking anticompetitive and unfair strategies” in an effort to maintain that monopoly on online retail. Amazon allegedly maintained its monopoly by enacting “anti-discounting measures” that would “punish” sellers and prevent other retailers from offering lower prices. David Zapolsy, Amazon’s general counsel, told Reuters the practices challenged by the agency “helped to spur competition and innovation across the retail industry.” The lawsuit was anticipated for several years, after the FTC first opened an investigation into Amazon in 2019. The probe expanded under FTC chair Lina Khan, who assumed the role under President Joe Biden. Khan has previously been critical of tech giants, including Amazon, Meta and others, and argued the U.S. failed to stop Amazon from becoming a monopoly while she was a law student at Yale. Amazon has petitioned to recuse Khan from possible antitrust matters regarding the company, according to the New York Times.

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