Key takeaways Instacart has terminated its AI-powered price testing program that allowed retailers to charge different prices for identical items to different customers simultaneously. A Consumer Repo...
The grocery delivery giant's decision comes two weeks after a joint investigation by Consumer Reports, Groundwork Collaborative, and More Perfect Union revealed that shoppers were unknowingly subjected to algorithmic pricing experiments that varied costs by as much as 23% for the same items from the same stores.
The study, published December 9, involved 437 volunteers across four cities who simultaneously added identical items to their Instacart shopping carts.
Researchers found that nearly three-quarters of grocery items tested were offered at multiple price points to different customers shopping at the same time from the same store.
"Two shoppers who are buying the exact same item from the exact same store at the exact same time are getting different prices," said Lindsay Owens, executive director of Groundwork Collaborative, according to reporting on the investigation.
The price discrepancies ranged from as little as 7 cents to $2.56 per item. In one test at a Seattle Safeway, shoppers saw prices for the same basket of 20 items vary from $114.34 to $123.93.
Some products were offered at as many as five different price points simultaneously.
In a blog post on Monday, Instacart acknowledged the experiments "missed the mark" for customers and announced the immediate termination of all item price tests.
"We've listened carefully to feedback from our customers," the company stated. "And 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.
At a time when families are working exceptionally hard to stretch every grocery dollar, those tests raised concerns, leaving some people questioning the prices they see on Instacart. That's not okay – especially for a company built on trust, transparency, and affordability."
An Instacart spokesperson confirmed to CBS News: "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."
Groundwork Collaborative's Owens responded to the announcement: "Once we pulled back the curtain on Instacart's hidden pricing experiments, the company had no choice but to close the lab," according to Consumer Reports.
Phil Radford, president and CEO of Consumer Reports, said in a statement: "We welcome Instacart's decision to reverse course and end its secret, AI-driven pricing experiments on unsuspecting shoppers.
At a time when everyday Americans are struggling with high prices, it is particularly egregious to see corporations secretly conducting individual experiments to charge different prices for the same products to get as much out of people's pockets as possible."
The announcement follows reported Federal Trade Commission scrutiny of Instacart's pricing practices.
Reuters reported on December 17 that the FTC sent the company a civil investigative demand regarding its AI-powered pricing tool, Eversight, which Instacart acquired in 2022.
The FTC stated: "The Federal Trade Commission has a longstanding policy of not commenting on any potential or ongoing investigations.
But, like so many Americans, we are disturbed by what we have read in the press about Instacart's alleged pricing practices."
The pricing controversy emerged as Instacart simultaneously faced separate legal action.
Last week, the company agreed to pay $60 million in customer refunds to settle FTC allegations of deceptive practices, including falsely advertising free deliveries while charging service fees and failing to clearly disclose automatic subscription renewals.
Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, said in a statement about that settlement: "Instacart misled consumers by advertising free delivery services, and then charging consumers to have groceries delivered, and failing to disclose to consumers who signed up for a free trial that they would be automatically enrolled into its subscription program.
The FTC is focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms."
Instacart denied wrongdoing in both matters.
The company maintained that its pricing tests were short-term, randomized experiments that did not use personal, demographic, or behavioral data and were conducted by only a small number of retail partners.
Following publication of the Consumer Reports investigation, at least 12 members of Congress sent formal letters to Instacart and the FTC.
Senate Minority Leader Chuck Schumer requested an FTC investigation, while Senator Ruben Gallego introduced the "One Fair Price Act," legislation aimed at preventing companies from using consumer data to set individualized prices.
Retailers, including Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market, and Target, were identified as having participated in the pricing experiments, according to the investigation.
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