FTC Opens Investigation Into Instacart Pricing After 'Bombshell Report'

The executive director of Groundwork Collaborative, the advocacy group behind a "bombshell report" that exposed Instacart's artificial intelligence-powered pricing schemes, welcomed the news that the federal government US opening an investigation into the business practice, and urged the Federal Trade Commission to follow the probe with concrete consumer protection actions.

The FTC told Gizmodo that "like so many Americans, we are disturbed by what we have read in the press about Instacart’s alleged pricing practices.”

Groundwork joined Consumer Reports and More Perfect Union in examining Instacart's practice, using the AI pricing software Eversight, of quoting different prices to different shoppers using the company's app, which allows people to order groceries and send a shopper to pick them up.

Some customers at a Safeway in Seattle were charged a price that was 23% higher than other shoppers for Skippy peanut butter, Oscar Mayer turkey, and Wheat Thins crackers. In Washington, DC, customers using the Insacart app saw eggs priced at $3.99, while others who logged on at the exact same time were charged $4.79 for the same brand at the same store.

Instacart has the ability to change prices based on data such as ZIP code or income, though the groups did not find it is currently using that information in its pricing experiments.

Groundwork noted that the scheme is taking place as American families are already struggling to afford groceries, electricity, healthcare, and other essentials.

“At a time when families are being squeezed by the highest grocery costs in a generation, Instacart chose to run AI experiments that are quietly driving prices higher," said Lindsay Owens, executive director of Groundwork. "While the FTC’s investigation is welcome news, it must be followed with meaningful action that ends these exploitative pricing schemes and protects consumers. Instacart must face consequences for their algorithmic price gouging, not just a slap on the wrist.”

In its report, the group called on the FTC to take action under Section 5 of the Federal Trade Commission Act, which prohibits “unfair methods of competition," or to bring enforcement cases or initiate rulemaking to officially classify AI-enabled pricing strategies as "unfair and deceptive" strategies.

The progressive think tank Roosevelt Institute applauded Groundwork and its partners for the "major investigation" that pushed the FTC to act.

Instacart's shares dropped by about 7% following the news of the FTC probe.

On Thursday, the agency announced that Instacart would pay $60 million in refunds to settle separate allegations that it falsely advertised "free delivery" while charging a service fee, falsely advertised a "100% satisfaction guarantee" that suggested it would offer full refunds, and failed to disclose terms regarding Instacart+ membership.