Instacart's AI Pricing Tool Under FTC Scrutiny

Instacart Faces FTC Inquiry Over AI Pricing Practices

Instacart is currently under scrutiny from the Federal Trade Commission (FTC), receiving a civil investigative demand concerning its Eversight AI-powered pricing tool. This action, as reported by Reuters, signifies a formal investigation into the platform’s pricing mechanisms.

The core of the inquiry centers around discrepancies in pricing for the same grocery items. Investigations have revealed that shoppers may encounter price variations of up to 23% for identical products sourced from the same stores.

Price Discrepancies and Instacart's Response

Instacart maintains that these price differences are the result of randomized testing, and are not linked to algorithms that profile customers based on their browsing activity. However, concerns remain, particularly given current economic anxieties surrounding essential goods.

The company asserts that the tests are conducted using an A/B testing methodology, akin to traditional pricing experiments conducted by retailers across different locations.

The Prevalence of Dynamic Pricing

Dynamic pricing is a common practice among digital platforms, utilized to maintain competitiveness. Industries such as airlines, hotels, and ride-sharing services like Uber routinely employ this strategy.

Proponents of dynamic pricing argue that it effectively balances supply and demand, optimizes profitability, and ultimately benefits both businesses and consumers.

Concerns Regarding Grocery Pricing

However, a distinction exists between surge pricing for non-essential services and price fluctuations for groceries. Food is a necessity, and increased costs can disproportionately impact consumers.

The FTC’s investigation, while not indicative of wrongdoing, reflects a broader concern regarding data-driven pricing strategies. In a challenging economic climate, AI-driven price testing of essential items is likely to draw regulatory attention.

Instacart's Explanation

Instacart contends that the market has misinterpreted the purpose of the Eversight initiative. A company spokesperson clarified to TechCrunch that retail partners retain control over their pricing strategies.

Furthermore, the company emphasizes that its pricing does not dynamically adjust in real-time based on supply or demand. Instacart also states that it does not utilize personal data, demographic information, or user behavior to determine item prices.

The company highlights that the pricing tests are a form of randomized A/B testing, similar to conventional retail pricing experiments.

• Key takeaway: The FTC is investigating Instacart's AI pricing tool, Eversight.
• Price variations: Shoppers are experiencing different prices for the same groceries.
• Instacart's defense: The price differences are due to randomized A/B testing.