FTC Investigates Instacart's AI Pricing Tool Over Price Disparities

The Federal Trade Commission (FTC) has sent a civil investigative demand to Instacart, a grocery delivery platform, regarding its AI-powered pricing tool, Eversight. According to Reuters, the agency wants to know why some people are paying substantially more for their organic granola than others. This move comes after a study revealed that shoppers are seeing fairly different prices for identical groceries from the same stores, with some cases showing prices up to 23% higher. Instacart has maintained that the price tests were randomized and not tied to an algorithm that targets customers based on their browsing history. However, the company's explanation may not be enough to alleviate concerns, especially for individuals who are already anxious about affording basic necessities like groceries. "Dynamic pricing isn't new or necessarily nefarious," said a spokesperson for Instacart. "It's how digital platforms stay competitive, and it helps balance supply and demand, maximizes profitability, and creates win-win scenarios." Dynamic pricing, also known as price discrimination, is a common practice in the digital economy. Airlines, hotels, and ride-hailing services like Uber have all used it to varying degrees. However, the application of this practice in the grocery delivery space has raised eyebrows. "The difference between paying surge pricing for a ride home from the bar and paying extra for groceries is that groceries are a necessity, not a luxury," said a consumer advocate. "When people are already struggling to make ends meet, the last thing they need is to be charged more for their groceries based on their browsing history or other factors." The FTC's investigation into Instacart's Eversight tool is not the first time the agency has looked into the use of AI-powered pricing tools. In 2020, the FTC sent a similar demand to Amazon regarding its use of AI to price-check products. However, the outcome of that investigation remains unclear. The FTC's current investigation into Instacart's Eversight tool is ongoing, and the agency has not specified what actions it may take if it finds that the company has engaged in unfair or deceptive practices. As the investigation continues, Instacart has maintained that its Eversight tool is designed to help the company stay competitive in the grocery delivery market. However, the company's use of AI-powered pricing tools has raised questions about the potential for price gouging and other unfair practices. The outcome of the FTC's investigation will likely have significant implications for the grocery delivery industry as a whole, and may set a precedent for how other companies use AI-powered pricing tools in the future.