Instacart to end AI price tests for retailers following investigation

Instacart has made the decision to cease the use of an AI-powered tool that allowed retailers to set varying prices for identical items on its grocery delivery platform. The move comes in response to a recent investigation conducted by Consumer Reports and Groundwork Collaborative, which uncovered evidence that major retailers such as Albertsons, Costco, Kroger, Safeway, and Sprouts Farmers Market were utilizing the AI pricing system to test different price points.

The investigation, based on data collected from over 400 volunteers during online shopping sessions in September, revealed significant price discrepancies for the same products. For example, a box of Wheat Thins at a Safeway in Seattle showed price variations of up to 23% during the testing. Lindsay Owens, the executive director of Groundwork Collaborative, stated that the exposure of Instacart’s undisclosed pricing experiments ultimately led to the termination of the AI pricing tool.

Furthermore, it was uncovered that Instacart was also conducting algorithmic pricing tests using product information from Target, despite having no commercial relationship with the retail giant. Instacart acquired Eversight, an AI-enabled pricing platform, in 2022 and began offering pricing software to retail companies in 2023. The company has clarified that the AI pricing tests did not involve customers’ personal or demographic information, and the decision to discontinue the tool was influenced by customer feedback.

Retailers will still have the autonomy to set their own prices on the Instacart platform, and may continue to offer different prices at various physical locations. The Federal Trade Commission (FTC) recently launched an investigation into Instacart’s AI pricing practices, although the agency has not commented on the company’s decision to halt the technology. In a separate legal matter, Instacart agreed to refund $60 million to customers to settle allegations of deceptive practices related to false advertising and undisclosed service fees.

As the company navigates these regulatory challenges, it is clear that transparency and fair pricing practices are paramount. Instacart’s commitment to addressing concerns raised by consumers and regulatory authorities is essential in maintaining trust and integrity within the grocery delivery industry.

This article was edited by Alain Sherter and contributions were made by The Associated Press.