After a report revealed that Instacart was charging consumers different prices for the same products, Instagram, the on-demand grocery delivery and pickup tech company, announced it will stop using an AI pricing tool that artificially drove up prices. Instacart’s Eversight pricing tool allowed retailers on its platform to experiment with product pricing using AI, which might have cost the average household up to $1,200 every year in additional spending.
The report from Groundwork Collaborative, Consumer Reports, and More Perfect Union generated backlash against Instacart that also included action on Capitol Hill from Minority Leader Chuck Schumer.
“Once we pulled back the curtain on Instacart’s hidden pricing experiments, the company had no choice but to close the lab,” Lindsay Owens, ececutive director, Groundwork Action, said. “But it shouldn’t take investigative research, public outcry, and the threat of Federal Trade Commission action to convince companies not to treat consumers like lab rats.”
Schumer’s letter to the FTC and the report caused the Commission to launch “an investigation into the company’s pricing practices and Instacart’s stock price plummeted in response,” according to a press release.
The report discovered that “Instacart charged consumers wildly different prices for the exact same goods in the same store at the same time.” Of the data collected from 437 consumers in four different cities, the study determined that prices for the same exact product varied by up to 23 percent, while overall Instacart basket totals varied by an average of 7 percent.
“Instacart is far from the only corporation using AI technologies to determine exactly how much profit they can extract from their customers by overcharging them,” Owens said. “It’s time for regulators to put a stop to corporate pricing schemes and take action to restore fair, predictable, and transparent pricing.”
Instacart’s decision to end the AI pricing experiments came shortly after the company agreed to pay $60 million in customer refunds to settle a separate FTC lawsuit over allegations of deceptive practices related to its subscription program and delivery fees. The company said its committed to transparency and affordability and said that customers shopping for the same items at the same time will now see the same prices.
“We understand that the tests we ran with a small number of retail partners that resulted in different prices for the same item at the same store missed the mark for some customers,” Instacart said in a statement.
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