A Blog by Jonathan Low


Nov 12, 2023

How Amazon's Deteriorating Service Was Intentionally Planned To Increase Profit

Complaints about the deterioration of Amazon service have become common. From substitution of Amazon preferred products for those customers believed they ordered, to an increase in deceptive ads for inferior products and to the disappearance of next day or even two day delivery despite increased Prime costs, the changes have been revealed by an FTC lawsuit to have been intentional Amazon policy to increase profits. 

Driven by a secret algorithm codenamed "Project Nessie," Amazon executives planned the service decline. JL

Jules Roscoe reports in Vox and Barry Ritholtz reports in The Big Picture:

Newly unredacted sections of the Federal Trade Commission’s complaint against Amazon for “illegally maintaining monopoly power” show company executives, including Jeff Bezos, made changes to the platform that boosted profits while harming consumers and sellers, and making the site less usable. “Amazon created a secret algorithm codenamed ‘Project Nessie’ to identify products which predicts other online stores will follow Amazon’s price increases.” (And) What happened to next day or even two day delivery? Now, it is next-week delivery. The upsell was misleading advertising from Amazon

Vox Newly unredacted sections of the Federal Trade Commission’s complaint against Amazon for “illegally maintaining monopoly power” show that company executives, including former CEO Jeff Bezos, knowingly made changes to the e-commerce platform that boosted profits while harming consumers and sellers, and making the site less usable.


The newly-revealed sections, which were initially redacted in the September complaint, quote internal Amazon documents and numerous unnamed Amazon officials as well as founder and former CEO Jeffrey Bezos. These quotes show that the company intentionally accepted an increasing number of junk advertisements that made the site worse to use for both sellers and customers and forced sellers to pay more for visibility, the FTC alleges. 

“Amazon’s online storefront once prioritized relevant, organic search results,” the complaint states. “Following directions from its founder and then-CEO Jeff Bezos, Amazon shifted gears so that it now litters its storefront with pay-to-play advertisements. 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.’” 

These junk ads make the user experience worse, which executives acknowledged. “Many results are plainly not what the customer searched for, such as when ‘a LA Lakers t-shirt ad show[ed] up in a search for ‘Seahawks t-shirt’,’” the complaint states, quoting an Amazon executive. “Other results are simply bizarre, like ‘Buck urine showing up in the first Sponsored Products slot for ‘water bottles’.’”

“Notably, Amazon has increased not only the number of advertisements it shows, but also the number of irrelevant junk ads, internally called ‘defects’,” the complaint states. “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.”


"Most sellers must now pay for advertising to reach Amazon’s massive base of online shoppers, while shoppers consequently face less relevant search results and are steered toward more expensive products," the complaint states.


The complaint still contains key redactions, such as Amazon’s revenue from these alleged practices. “Amazon’s price hikes in the form of pay-to-play advertisements have been enormously lucrative, leading its revenues from U.S. ad sales to skyrocket from $1 billion in 2015 to [redacted] billion in 2021,” the complaint states. “Amazon took in [redacted] billion in revenue from U.S. Marketplace seller fees in 2021 alone. Strikingly, these seller fees now account for over [redacted] % of Amazon’s total profits. Sellers pay. Shoppers get lower-quality search results for higher-priced products. Only Amazon wins.” 

In an emailed statement, Amazon said that the allegation that executives were encouraged to accept more defects is “grossly misleading and taken out of context.” The statement pointed to a September report from data and insights firm Kantar that claimed Amazon is consumers’ preferred ad platform for consumers.

The complaint also references an internal Amazon study, in which economists found that the median price for Amazon-sponsored products was higher than the median price for neighboring organic content. The percent difference between the two is redacted in the complaint.


“In that study, Amazon’s economists recognized that its increased advertising makes it more difficult for customers to avoid higher prices,” the complaint states. “In other words, Amazon’s proliferation of pay-to-play advertisements increases the costs that sellers must bear to reach shoppers.” 

In order to reach shoppers, many sellers also opt for their products to be eligible for Amazon Prime, as this boosts their ranking in Amazon’s search engine. The main way for sellers to attain eligibility is to subscribe to Fulfillment By Amazon (FBA) in order to get their products shipped. FBA is a part of Amazon’s supply chain solutions, and allows sellers to outsource all shipping logistics to the company. 

Amazon  “temporarily relaxed its coercive conduct” in 2018 and did not require sellers to use FBA in order to become Prime eligible. The complaint states that this decision was “immediately popular with both shoppers and sellers,” but that the company soon realized it would create “competition that would threaten Amazon’s monopoly power.” 

“An Amazon executive explained to his colleagues that he had an 'oh crap moment’ when he realized that this was ‘fundamentally weakening [Amazon’s] competitive advantage in the U.S.…as sellers are now incented to run their own warehouses and enable other marketplaces with inventory that in FBA would only be available to our customers’,” a newly-unredacted quote reads.


Another quote from Amazon’s former head of Global Fulfillment Services reads that the prospect of independent fulfillment providers increasing competition “keeps me up at night.”

Amazon spokesperson Tim Doyle told Motherboard in an emailed statement that the FTC’s characterization of this brief fulfillment change to Seller Fulfilled Prime (SFP) in 2018 was “highly misleading,” and that sellers who fulfilled their own products were “promising deliveries within two days less than 16% of the time—far worse than the performance of sellers using Fulfillment by Amazon and far below the high standards and expectations our customers have for Prime.”

The complaint states that, “Sellers enrolled in SFP met their promised ‘delivery estimate’ requirement set by Amazon more than 95% of the time in 2018. At times, these sellers outperformed FBA-fulfilled orders on this metric.”

“We have learned a lot, and over the last several years we updated the program requirements,” Doyle said. “We’ve now reopened enrollment to an improved Seller Fulfilled Prime program that can meet our customers’ expectations. The misleading figures the FTC points to in the complaint falsely portray how we work with sellers to meet our customers’ high expectations.”

When the FTC’s complaint was first made public, Amazon sent an email to its sellers denying the allegation that it had unfairly overcharged them in fees, and saying that the lawsuit “does not change anything about our relationship.”


The complaint also alleges that Amazon punishes its sellers for discounting their product prices on other sites. “As Amazon internally admits, these tactics have a ‘punitive aspect,’ and many sellers ‘live in constant fear’ of them,” the complaint states. It later quotes Doug Herrington, the company’s CEO of Worldwide Stores, as saying that “policing sellers to prevent them from discounting elsewhere, so Amazon can maintain a reputation for having low prices, is ‘a dirty job, but we need to do it.’”

“Amazon recognizes that sellers find ‘that it has become more difficult over time to be profitable on Amazon’ due to Amazon’s ‘increasing fees and costs’,” the complaint states. “But as one seller explains, ‘we have nowhere else to go and Amazon knows it.’”

The newly unredacted sections also contain information about Amazon’s “Project Nessie,” which previously was only described as an algorithm used by the company that had “already extracted over [redacted] from American households.” That number has now been revealed to be “a billion dollars.”

“Amazon created a secret algorithm internally codenamed ‘Project Nessie’ to identify specific products for which it predicts other online stores will follow Amazon’s price increases,” a previously redacted section of the lawsuit reads. “When activated, this algorithm raises prices for those products and, when other stores follow suit, keeps the now-higher price in place. Amazon has deemed Project Nessie ‘an incredible success’: it has generated more than $1 billion in excess profit for Amazon.”


“Aware of the public fallout it risks, Amazon has turned Project Nessie off during periods of heightened outside scrutiny and then back on when it thinks that no one is watching,” the complaint continues. It names holiday peak season and Prime Day as two times when Amazon intentionally pauses the algorithm, due to “increased media focus and customer traffic.”

Amazon spokesperson Doyle told Motherboard in a statement that the FTC was wrong. “The FTC claims that an old Amazon pricing algorithm called Nessie is an unfair method of competition that led to raised prices for consumers,” Doyle said. “This grossly mischaracterizes this tool. 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 ran for a few years on a subset of products, but didn’t work as intended, so we scrapped it several years ago.”


The last time that Amazon paused Project Nessie, the lawsuit states, was when the FTC initially began investigating it in 2019. It states that the company claims Project Nessie is currently paused—but that in January of 2022, Herrington had asked about “turning on ‘[o]ur old friend Nessie, perhaps with some new targeting logic’ to juice profits for Amazon’s Retail arm.”

The complaint states that Amazon estimated Project Nessie to have increased its yearly profits in 2018 by $334 million.

Ritholtz In August of 2022, I explained how Amazon became ordinary. Today I want to discuss how they have become bad.

Since I first discussed the companies that lost my affection during the pandemic nearly two years ago, Amazon continues to stand out as delivering an ever-worsening set of experiences. I wanted to wait until after the (faux retail holiday) Prime Day(s) ended before sharing a few tales of further (to use Cory Doctorow’s phrase) “Enshittification.”

There are many problematic issues, but I group them into these 4 broad categories: The Shopping Experience, Overnight (LOL) Deliveries, Returns/Product Credit, and Unreturnable Items.

1. Shopping Experiences: What once was a simple, clean, useful retail website is now a dumpster fire, overrun with advertising, poor search results, and sketchy third-party sellers. None of these are why I have been using $AMZN since 1998, but all of these are why I use it less and less nowadays.

If there was a silver lining to the lockdowns, it is that most of us have accounts with many other retailers (Target, Walmart, InstaCart, Chewy, etc.) now that we did not have prior to 2020. The amazing advantage Amazon had as a retailer was having everybody’s credit card/address on file, while other retailers did not; that advantage has dramatically attenuated.

That is an unexpected result of a random pandemic, but every retailer was dealt the same hand. What is different is how each played that deal.

2. Deliveries: Free delivery began at $25, then went to $35, then any price for Prime members. But what began as free 2-day delivery some years later improved to free next-day delivery, and then depending upon where you were you lived and what you were buying, same day delivery! How awesome is that?

No more.

Now, it is next-week delivery — for me, it is on Tuesday, Oct 17 for Free Prime Delivery; or Free Amazon Delivery on Wednesday, October 18  (“fewer boxes, fewer trips“); or next Friday, October 20 (Free no rush Delivery(?!). Note that today is Thursday, October 12th.

What happened to next-day or even 2-day delivery?

Last weekend was the kicker: On Sunday, I got an “Add another $27 for free next day delivery” blurbage while shopping. Wait, don’t I already pay $169 per year for free next-day delivery? But we were out of Probiotics for Dogs and so I added that to get whatever other doohickey was in my cart for the next day, Monday.

The problem? 3 of the 4 items I ordered arrived Wednesday.

This was not a case of a Nor’easter or winter storm; The upsell was simply misleading advertising from Amazon itself, which as mentioned earlier is festooned with crappy adverts. Was it a bad algo or just a bait & switch to get me to make more purchases?

Dunno, but that won’t happen again…

3. Credits for Returns: That Probiotics for Dogs I mentioned? Nowhere on the page where that is sold does it mention that it is non-returnable. Why do I know that? I bought something a few months ago that was advertised as New on the product page but arrived as obviously Refurbished, not new. I went to return it and Amazon refused. I very calmly explained to the customer service rep that selling used goods as new is not permitted in NYS, and how high do you want to elevate this? I received not a refund to my credit card but an Amazon Credit.1

BTW, this latest change seems to be the default settings (Amazon vs CC credit). With a Master Card or Visa credit, you owe that much less to your card company. With an Amazon credit, the hope is either a free loan to them or free money in the form of Breakage — unused gift cards.

It’s yet another decrease in delight in what was once known as the Amazon experience.

Out of morbid curiosity, I have since been checking every new delivery just to see if it is returnable. More than I expected were not returnable. The problem is that there is no notice given to the consumer that this product cannot be returned on its product page.

This leads us to:

4. Items that You Can’t Return: There are some items purchased on Amazon.com that you can’t return, and for obvious reasons. Among them are digital items, cards, products unsafe for return, etc. But the consumer should be clearly informed of that prior to purchase.

If only every item sold had its own page where such information might be displayed, instead of being nested 3 levels deep into a return policies page.


Where is Jeff Bezos? None of these things would have happened in the good old days of Amazon.

The blush is off the rose.


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