Instacart Puts the Brakes on Controversial AI Pricing Tests Amid Consumer Backlash and FTC Scrutiny
In a significant move addressing mounting consumer concerns and regulatory pressure, Instacart has announced the immediate halt of its AI-powered dynamic pricing experiments. This decision marks a pivotal moment for the grocery delivery giant, which had been using sophisticated algorithms to allow retailers to charge different prices for identical items on its platform.
The Rise and Fall of AI-Powered Pricing
For some time, whispers and anecdotes suggested that prices for the same product on Instacart could vary from one customer to another, or even at different times. These suspicions were validated by a recent bombshell investigation conducted by Consumer Reports and the nonprofit advocacy group, Groundwork Collaborative. Their findings shed light on a system that allowed major retailers like Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market, and Target to experiment with dynamic pricing.
The investigation, based on data collected from over 400 volunteers in September, revealed startling discrepancies. One notable example cited a box of Wheat Thins at a Seattle Safeway, where the price varied by as much as 23% during a single shopping session.
“Once we pulled back the curtain on Instacart’s hidden pricing experiments, the company had no choice but to close the lab,” stated Lindsay Owens, executive director of Groundwork Collaborative, underscoring the impact of their advocacy.
Instacart’s Response and the Road Ahead
Responding to the outcry, an Instacart spokesperson confirmed in an email statement: “Effective immediately, Instacart is ending all item price tests on our platform. Retailers will no longer be able to use Eversight technology to run item price tests on Instacart.”
This move comes after Instacart acquired Eversight, an AI-enabled pricing platform, in 2022 and began offering its pricing software to retail partners in 2023. While the company maintained that these AI pricing tests did not factor in customers’ personal, demographic, or user-level behavioral characteristics, the decision to discontinue the program was ultimately driven by “feedback from Instacart customers.”
It’s important to note that while Instacart will no longer facilitate these specific AI-driven tests, retailers retain the autonomy to set their own prices on the platform. Furthermore, price variations may still occur at different brick-and-mortar locations, a common practice in the retail sector.
Federal Scrutiny and Past Settlements
The controversy surrounding Instacart’s pricing practices wasn’t limited to consumer groups. Reuters reported on December 17 that the Federal Trade Commission (FTC) was actively probing Instacart over its AI pricing tests. Although the FTC declined to comment directly on the report, it did issue a statement expressing that it was “disturbed by what we have read in the press about Instacart’s alleged pricing practices.”
This isn’t the first brush with the FTC for Instacart. Just last week, the company agreed to a significant $60 million settlement in customer refunds. This settlement addressed federal allegations of deceptive practices, where the FTC accused Instacart of falsely advertising “free deliveries” and failing to clearly disclose various service fees.
What This Means for Consumers and the Future of Online Pricing
The decision by Instacart to halt its AI pricing experiments is a testament to the power of consumer advocacy and regulatory oversight. It underscores a growing demand for price transparency and fairness in the rapidly evolving landscape of online retail and grocery delivery. For millions of users, this change could bring a renewed sense of trust and predictability to their online shopping experience, signaling a win for consumer rights in the digital age.
