Watchdog Celebrates Victory Over Instacart Pricing Scheme—But Says Broader Corporate Abuse Remains
"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," said the executive director of Groundwork Action.
The watchdog group that exposed Instacart's artificial intelligence pricing scheme is rejoicing after the company announced on Monday that it was ending the controversial program.
Earlier this month, Consumer Reports joined the Groundwork Collaborative and More Perfect Union to report that the grocery shopping app—which calls itself the "largest online grocery marketplace in North America"—was using the AI pricing software Eversight to charge up to 23% more for some customers than others for the same items, subjecting users to a "pricing experiment" that could cost them as much as $1,200 extra each year.
The Federal Trade Commission (FTC) took notice of the report, saying it was "disturbed" by the findings, and launched an investigation on Thursday, which caused the company's stock price to plummet by about 7%. It also attracted attention from members of Congress, including Senate Minority Leader Chuck Schumer (D-NY), who demanded government action on what he called "shakedown pricing."
Instacart agreed that same day to pay the FTC $60 million in a settlement for what the commission said was "a variety of deceptive tactics that misled consumers and caused them to pay more in fees." These included falsely advertising "free delivery" to consumers on their first order, implying that customers would receive a full refund if they were dissatisfied with their delivery, and failing to disclose membership charges.
The settlement does not mention Instacart's use of AI pricing experiments, but on Monday, the company said it would hit the brakes on that as well, following customer backlash.
"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," the company said in a statement. "Now, if two families are shopping for the same items, at the same time, from the same store location on Instacart, they see the same prices—period."
While it acknowledged that the pricing scheme "missed the mark for some customers," the company maintains that it was not using "dynamic pricing or surveillance pricing" and that it was not changing prices "based on supply or demand, personal data, demographics, or individual shopping behavior."
Alex Jacquez, Groundwork's chief of policy and advocacy, celebrated on social media that "Instacart has ended all item pricing experiments on its platform," calling it a "big win for consumers."
Groundwork Action's executive director, Lindsay Owens, likewise took pride in the fact that "once we pulled back the curtain on Instacart’s hidden pricing experiments, the company had no choice but to close the lab," but also said "it shouldn’t take investigative research, public outcry, and the threat of FTC action to convince companies not to treat consumers like lab rats."
"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," she added.
Though the investigation did not find evidence that Instacart was using these methods, other companies—including Amazon, Delta Air Lines, and Home Depot—have been accused of fluctuating prices for consumers based on ZIP code or income level.
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.”
