A huge report from Consumer Reports, Groundwork Collaborative and More Perfect Union has revealed that pricing experiments by Instacart could be inflating or reducing grocery prices for different users on the same items at the same stores. These prices could differ up to 23% at some of the largest grocers in the country, including Costco, Kroger, Safeway and Target.
The collaborative report involved enrolling 437 shoppers across four cities where individual shoppers would add the same items to their carts in the Instacart app from the same store. According to their findings, nearly 75 percent of the grocery items were shown at multiple prices, with as many as five different prices for one product.
These limited, short-term, and randomized tests help retail partners learn what matters most to consumers and how to keep essential items affordable.”
Instacart statement
Instacart has disclosed that shoppers are not aware they’re in an AI-based pricing experiment and claimed that price differences are “negligible.” The company also told Consumer Reports that most customers will see “the standard price.” However, the report shows this issn’t the case at all—and
After the report debuted Instacart released a blog post that attempts to explain the tests, claiming the higher prices are supposed to help retailers align online prices with in-store prices. It goes on to say that the company is committed to affordability.
“Just as retailers have long tested prices in their physical stores to better understand consumer preferences, a subset of only 10 retail partners—ones that already apply markups—do the same online via Instacart,” the company stated. “These limited, short-term, and randomized tests help retail partners learn what matters most to consumers and how to keep essential items affordable.”
Apparently, the AI pricing was primarily being tested at Safeway and Target stores. A Target spokesperson told The New York Times that the retailer is "is not affiliated with Instacart and is not responsible for prices on the Instacart platform,” and Instacart has reportedly stopped the experiment at Costco and Target.
What it could mean for future prices
Retailers outside of Instacart are already using algorithms and technology to set prices. In 2024, the Federal Trade Commission issued a warning against eight companies that it accused of using personal data to set individualized prices on the same goods and services.
“Firms that harvest Americans’ personal data can put people’s privacy at risk. Now firms could be exploiting this vast trove of personal information to charge people higher prices,” said former FTC Chair Lina M. Khan at the time.
State laws against algorithmic pricing
Consumer Reports notes that a number of states have started introducing bills or enacting laws to address algorithmic pricing. New York state just had a law go into effect in November, the Algorithmic Pricing Disclosure Act, which requires companies to have a disclaimer that reads, “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.”
Unfortunately, that’s a rarity, and the next step in algorithmic pricing may already be taking place in your grocery stores between Instacart and efforts like its Carrot Tags program for retailers, which would create “instant and accurate pricing changes with dynamic price and promotion optimization strategies at the shelf.”
Instacart has reportedly taken steps to minimize this research (by deleting language and stopping the experiment in some stores) since the Consumer Reports article, but the work is likely continuing in the background.
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