E-commerce giant Amazon.com (NASDAQ:AMZN) is facing another debate over the unlawful use of “Project Nessie” in the ongoing monopoly lawsuit with the Federal Trade Commission (FTC). As per a Wall Street Journal report, the redacted parts of the lawsuit show that Amazon used the algorithm to assess the extent to which it could increase prices, with the intention of encouraging competitors to do the same.
The “Project Nessie” algorithm helped Amazon earn over $1 billion in revenue, the claim alleges. Amazon’s sheer dominance in the online marketplace propels rivals to emulate its pricing points. The lawsuit also alleges that in cases where competitors did not adjust their prices to align with Amazon’s pricing, the algorithm would reduce the prices back to their regular levels.
Amazon’s Ongoing Lawsuit
An Amazon spokesperson denied the allegations and said, “Project Nessie was a project with a simple purpose—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.”
Amazon is undergoing one of the biggest antitrust cases in American history with the FTC. The company has denied all allegations of wrongdoing and has been firm in its stance that if it did use monopolistic practices, it would have to stop offering low, competitive prices. The FTC is also alleging that Amazon’s influence over third-party sellers leads to inflated selling prices even at other retailers and the merchant’s own website. Amazon is also said to “punish” third-party merchants if they sell items at lower prices elsewhere.
Amazon’s cut from third-party sellers is also on the rise. Reports suggest that more than a majority of Amazon’s retail sales come from third-party sellers. The mammoth size of the e-commerce platform, a broad-based logistic network, and its dominance in the space compels merchants to stick with it.
Only time will tell which other revelations may emerge from the ongoing lawsuit and what the final outcome will be.
What is the Future of Amazon Stock?
Currently, Amazon’s stock is under pressure due to several reasons. The slump in consumer spending, the rising delivery costs owing to higher fuel prices, and the ongoing anti-monopoly lawsuit are dragging down its performance. Year-to-date, AMZN stock is up 45.3%.
Despite the odds, two analysts have recently reiterated their Buy stance on AMZN stock and have a similar price target on the stock of $180 (44.3% upside). Mizuho Securities analyst James Lee is particularly bullish about the Amazon Cloud segment, AWS. His recent checks show that demand and spending on cloud services continue to gain strength, and Amazon is poised to benefit from the same.
Similarly, J.P. Morgan analyst Doug Anmuth is also optimistic about the AWS segment and Amazon’s retail operations. He sees the upcoming holiday season, the two-day Prime sale, and same-day delivery options as key reasons for Amazon’s growth. Also, Anmuth is in favor of Amazon in regards to the FTC lawsuit.
Overall, Amazon.com commands a Strong Buy consensus rating on TipRanks. This is based on 40 Buys and one Hold rating. The average Amazon price forecast of $176.02 implies 41.1% upside potential from current levels.
