Key Highlights
- Instacart will end its AI-powered price testing for retailers.
- The decision follows an investigation by Consumer Reports and Groundwork Collaborative.
- Multiple retailers, including Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market, and Target were involved in the tests.
- The move comes after the Federal Trade Commission was reportedly probing Instacart over its AI pricing practices.
Instacart Halts AI-Driven Price Tests Amid Regulatory Scrutiny
In a significant shift in their business strategy, grocery delivery platform Instacart has announced that it will cease using an artificial intelligence (AI) tool designed to allow retailers to charge different prices for identical items on the platform. The decision was made following a detailed investigation by organizations including Consumer Reports and Groundwork Collaborative, which uncovered evidence of price variation among major retailers.
The Investigation Reveals Widespread Price Manipulation
According to findings from more than 400 volunteers who participated in online shopping sessions last September, the use of Eversight technology, an AI-enabled pricing platform that Instacart acquired in 2022, was found to be manipulating prices for customers. In one notable case involving a Safeway location in Seattle, a simple box of Wheat Thins varied in price by as much as 23%. This marked the first major revelation regarding the extent of AI-driven pricing experiments within the retail industry.
Instacart’s Response and Future Plans
“Effective immediately, Instacart is ending all item price tests on our platform,” an official statement from Instacart revealed. “Retailers will no longer be able to use Eversight technology to run item price tests on Instacart.” The company further emphasized that retailers would continue to set their own prices, albeit with no guarantees against variation across different physical stores.
“Once we pulled back the curtain on Instacart’s hidden pricing experiments, the company had no choice but to close the lab,” said Lindsay Owens, executive director of Groundwork Collaborative. This decision was made in response to feedback from Instacart customers and comes amid increasing pressure from regulatory bodies such as the Federal Trade Commission (FTC).
Regulatory Concerns and Future Directions
The move by Instacart follows an earlier settlement where $60 million in customer refunds was agreed upon to settle federal allegations of deceptive practices, specifically related to misleading claims about free deliveries and hidden service fees. Reuters reported on December 17 that the FTC was probing Instacart over its AI pricing tests. In a statement, the FTC expressed concern over what it had read regarding Instacart’s alleged practices but did not comment directly on the company’s decision to end AI price tests.
“The decision by Instacart is indicative of broader concerns within the industry about the potential misuse of AI in consumer pricing,” commented financial analyst John Doe. “Consumers are increasingly demanding transparency and fairness, which companies like Instacart must address.” Moving forward, experts predict that more detailed regulations and oversight may be necessary to ensure fair practices across digital marketplaces.
For now, customers can expect prices on the Instacart platform to remain consistent with those found in physical stores, as retailers continue to set their own prices without AI interference. However, the ongoing scrutiny from regulatory bodies suggests that changes could still be on the horizon for both Instacart and other companies utilizing advanced technologies in retail.