Amazon Designs Algorithm to "Discipline" Rivals

a. Amazon’s first-party anti-discounting algorithm is designed to discipline rivals from lowering their prices

326. Amazon designed and implemented a first-party anti-discounting algorithm to deter other online stores from offering lower prices than those of Amazon’s Retail products. Amazon recognizes the importance of maintaining the perception that it has lower prices than competitors. Behind closed doors, however, Amazon executives actively (redacted)

327. Amazon’s former (redacted)

328. Instead, (redacted)

329. When using its first-party anti-discounting algorithm, Amazon disciplines rivals by (redacted)

330. In effect, Amazon deters rivals from even attempting to compete with Amazon’s first-party Retail business on price because rivals quickly learn that their price cuts do not result in greater market share or scale, only lower margins.

331. In an open and competitive market, rivals can compete to attract business by offering lower prices to shoppers. Instead, Amazon has committed to its first-party antidiscounting pricing strategy because that strategy deters rivals from price competition and prevents rivals from drawing business and gaining market share. Amazon’s algorithmic process unfolds over and over to discipline rivals who dare to lower their prices, conveying to them that they will not gain business through competing on price. As a result, Amazon has successfully taught its rivals that lower prices are unlikely to result in increased sales—the opposite of what should happen in a well-functioning market.

332. By relentlessly disciplining rivals, Amazon forecloses the give and take that is typical in a competitive market and limits rivals’ ability to gain customers by undercutting Amazon’s prices. The result is that rivals’ growth is stunted, and shopper prices are pushed higher than they would be in a world without Amazon’s anti-discounting scheme. According to (redacted) Amazon’s first-party anti-discounting algorithm has “work[ed]” (redacted)