Instacart, enabled by the artificial intelligence pricing software Eversight, is running large-scale, hidden price experiments on unsuspecting customers, a new investigation by the Groundwork Collaborative, Consumer Reports, and a More Perfect Union shows.
The report analyzed live shopping data from more than 400 Instacart shoppers across four U.S. cities. The findings show many U.S. shoppers who order grocery pickup and delivery through Instacart are unknowingly enrolled in AI-enabled experiments that can charge up to 23 percent more for the same item ordered from the same store at the same time.
The average price variations observed in the study could cost a household of four about $1,200 per year.
Instacart’s algorithmic pricing experiments were found to be taking place through the platform at some of the nation’s biggest grocery retailers, including Albertsons, Costco, Kroger, Safeway, Sprouts Farmers Market, and Target. At a time when food price increases outpace overall inflation and Americans report that the price of groceries is a major cost concern, pricing experiments used by companies such as Instacart make the situation worse.
Key findings
- Nearly three-quarters of grocery items that were tested on Instacart showed different prices to different shoppers. Some items carried up to five different price points at the same time. For example, people shopping at a Safeway in Washington, D.C., saw a dozen Lucerne eggs listed at five different prices ⎼ $3.99, $4.28, $4.59, $4.69, and $4.79.
- On average, the difference between the lowest and highest prices shoppers saw for basics such as cereal, pasta, and peanut butter was 13 percent, with the highest price 23 percent more than the lowest.
- Researchers found that overall Instacart basket totals varied by an average of about 7 percent for the exact same items from the exact same locations, at the exact same time. Based on the amount that Instacart says the average household of four spends on groceries in the United States, that could translate into a cost swing of about $1,200 per year.
“This investigation shows how it’s becoming more common for companies to use hidden algorithmic pricing techniques without telling the customer,” Justin Brookman, director of tech policy at Consumer Reports, said in a statement. “In the case of Instacart, these tactics hurt families who are simply trying to purchase essential groceries.”
At a time when everyday Americans are struggling with high prices, it’s particularly egregious to see corporations secretly conducting individual experiments to see how much a person is willing to pay, Brookman said. Companies need to be transparent and upfront with people about pricing, so that they can make informed choices and keep more of their hard-earned money.
“We encourage the Federal Trade Commission and state attorneys general to investigate Instacart’s pricing tactics,” he said.
On its website Instacart acknowledges that it runs price tests, that “end shoppers are not aware that they’re in an experiment,” and that when used at scale across a store network, the price change tactics “create an orthogonal array of data points that changes the game.”
In some cases, Instacart kept the sale price of items the same but changed the “original” price, creating the impression of a larger discount.
Brookman said Instacart claims their price experiments are randomized and “negligible,” but against the backdrop of the fastest increase in food prices since the late 1970s, the report shows Instacart’s experiments are yet another way corporate pricing tactics are squeezing American families.
Policy implications
The findings of the report arrive as federal and state lawmakers intensify scrutiny of potentially deceptive corporate pricing schemes including algorithmic and “surveillance” pricing, where a consumer’s personal data and behavior is used to determine their willingness to pay.
States including New York, Colorado, California, Georgia, Illinois, and Pennsylvania have introduced or advanced legislation to curb individualized or algorithm-driven price manipulation. At the federal level, Rep. Greg Casar’s, D-Texas, Stop AI Price Gouging and Wage Fixing Act would ban the use of personal data to set individualized prices.
A warning
“Fair and honest markets are the bedrock of a healthy economy,” the authors of the report said. “As more consumers learn about, and decry, these practices, perhaps companies will change course. But if they do not, policymakers should intervene and require them to change their practices.”
Consumer Reports is a testing and consumer advocacy organization, the Groundworks Collaborative is an economic think tank, and a More Perfect Union is a news organization that focuses on labor issues, economic policy, and corporate accountability.
