Instacart scraps AI pricing tests after backlash over grocery price swings

Instacart said Monday that it will no longer allow retailers to use an AI-powered price testing program, two weeks after an extensive investigation showed wide discrepancies in the cost of groceries purchased through the platform.

Effective immediately, retailers will no longer be able to use Eversight technology to run price tests on Instacart, the San Francisco-based company said in a blog post. Previously, a small number of retail partners were able to conduct testing that resulted in different prices for the same item at the same store—something that “missed the mark for some customers,” Instacart said in a blog post.

“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,” the company said. “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.”

Monday’s announcement of the end of item price tests marks the third time that Instacart has responded to a widely-shared study by Consumer Reports and Groundwork Collaborative. The monthslong investigation conducted by the magazine and progressive policy group found that algorithmic pricing might result in price differences for the same items of as much as 23%. 

INSTACART IN FOCUS IN D.C.

Instacart responded swiftly to the concerns raised in that investigation. In a lengthy blog post late last week, the company sought to clarify what sorts of pricing tests it does—and doesn’t—allow on the platform by responding to four different “myths,” including that it was engaging in “dynamic” or “surveillance” pricing.

But the tech company also came under renewed scrutiny in Washington, D.C. as a result of this study. Rep. Angie Craig, a Democrat from Minnesota, demanded answers from Instacart regarding the scope and implications of pricing tests, while the Federal Trade Commission sent a civil investigative demand to Instacart about its pricing practices, as Reuters reported last week.

Instacart was recently the subject of an FTC investigation regarding deceptive business practices. The company was ordered to pay $60 million in consumer refunds, though it denied any allegations of wrongdoing and answered questions from the government agency regarding its AI pricing tools as part of that settlement.

REGAINING TRUST

The company reiterated again Monday that it has not permitted retailers to do price testing based on supply or demand, personal data, demographics, or individual shopping behavior. Instagram ended the price testing program to engender trust with its customers. 

“Customers should never have to second-guess the prices they’re seeing,” the company said.

Though shares of Instacart fell about 2% in mid-day trading on Monday, it has almost fully recouped a nearly 6% selloff that followed the publication of the price testing study earlier this month.

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