Report Exposes Instacart's Hidden AI Price Experiments That Could Cost Families $1,200 Per Year
"At a time when everyday Americans are struggling with high prices, it is particularly egregious to see corporations secretly conducting individual experiments to see how much a person is willing to pay," said one advocate.
Consumer advocates on Tuesday called on the Federal Trade Commission and state officials to investigate artificial intelligence-enabled pricing experiments used by Instacart, the grocery shopping app millions of Americans rely on, that charge up to 23% more for some shoppers than others when they buy the same item at the same store.
Consumer Reports joined the advocacy group Groundwork Collaborative and the labor-focused media organization More Perfect Union to uncover Instacart's pricing experiments enabled by Eversight, an AI pricing software that Instacart acquired in 2022. The company's CEO said last year that the experiments have helped the company “to really figure out which categories of products our customers [are] more price sensitive on"—in other words, to tailor prices based on a customer's shopping habits, whether they're near a competing store, and other factors.
The groups' study, Same Cart, Different Price, describes how researchers ran five tests with 437 participants, studying the prices of a basket of items bought at two Target stores and three Safeway stores using Instacart.
In one test at a Safeway in Washington, DC, shoppers logged on to the app to buy a carton of eggs from the same brand at the same time and found that the price they were given varied widely. Some shoppers were charged just $3.99 for the eggs, while others saw a price as high as $4.79—20% higher.
Shoppers at a Safeway in Seattle saw a 23% difference in prices for Skippy peanut butter, Oscar Mayer turkey, and Wheat Thins crackers. At two different Safeways in Washington, DC, Instacart quoted shoppers at one store a price that was 23% higher than at another for Signature Select Corn Flakes.
"It’s time for Instacart to close the lab. Americans shopping for groceries aren’t guinea pigs and shouldn't have to pay an Instacart tax.”
For the same basket of groceries, shoppers at the Seattle store were asked to pay as much as $123.93, while others were charged just $114.34.
"The average price variations observed in the study could cost a household of four about $1,200 per year," said Groundwork.
Justin Brookman, director of tech policy at Consumer Reports, said Instacart's tactics "hurt families who are simply trying to purchase essential groceries."
"At a time when everyday Americans are struggling with high prices, it is particularly egregious to see corporations secretly conducting individual experiments to see how much a person is willing to pay," said Brookman. "Companies must be transparent and upfront with people about pricing, so that they can make informed choices and keep more of their hard-earned money. We encourage the Federal Trade Commission and state attorneys general to investigate Instacart’s pricing tactics."
Groundwork noted that Instcart's website acknowledges that it runs price tests, but states that "shoppers are not aware that they’re in an experiment" and are having their grocery prices selected for them via algorithm.
While Instacart has claimed its price experiments are "negligible," the groups emphasized that they're being used "against the backdrop of the fastest increase in food prices since the late 1970s."
After previous reporting on companies' use of "shrinkflation," "dynamic pricing," and other practices that keep prices high even as pandemic-era labor and supply chain issues have subsided, "today’s report shows Instacart’s experiments are yet another way corporate pricing tactics are squeezing American families," said Groundwork.
The study did not find evidence that Instacart is giving shoppers different prices based on their ZIP code or income, as companies like Amazon, Delta Air Lines, and Home Deport have been accused of doing.
But the groups said Eversight gives the company the capability to use that data to make pricing decisions tailored to particular shoppers.
“Instacart is quietly running pricing experiments on millions of shoppers during the worst grocery affordability crisis in a generation, and it’s costing households as much as $1,200 a year,” said Groundwork Collaborative executive director Lindsay Owens. “They have turned the simple act of buying groceries into a high-tech game of pricing roulette. When the same box of Wheat Thins can jump 23% in price because of an algorithm, that’s not innovation or convenience, it’s unfair. It’s time for Instacart to close the lab. Americans shopping for groceries aren’t guinea pigs and shouldn't have to pay an Instacart tax.”
The groups credited some state and federal lawmakers who have begun to take notice of pricing practices like Instacart's; US Rep. Greg Casar (D-Texas) introduced the Stop AI Price Gouging and Wage Fixing Act in July with the aim of prohibiting the use of automated systems to set prices. New York has enacted the first-of-its-kind Algorithmic Pricing Disclosure Act, which requires companies to prominently disclose to customers, "This price was set by an algorithm using your personal data" when they use methods like Instacart's. Other state legislation has been introduced in Colorado, California, and Pennsylvania to ban the use of surveillance to set prices.
The groups called on the FTC to take action under Section 5 of the Federal Trade Commission Act, which bans "unfair methods of competition." Those could include “'price discrimination not justified by differences in cost or distribution,' which appears to match Instacart’s pricing experiments and fluctuations," the report reads.
The FTC could also bring enforcement cases or initiate rulemaking to officially label AI-enabled pricing strategies as an "unfair or deceptive practice," affirming that companies who use them are breaking a consumer protection standard.
"Fair and honest markets are the bedrock of a healthy economy," reads Tuesday's report. "Companies like Instacart offer great convenience, but they are increasingly pursuing corporate pricing practices that unfairly decouple the price of a product from its true cost. As more consumers learn about, and decry, these practices, perhaps companies will change course. But if they do not, policymakers should intervene and require them to change their practices."
