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The U.S. Federal Trade Commission is probing Instacart two sources familiar with the matter told Reuters, as the retail platform faces criticism over its artificial intelligence-driven pricing tool.
Instacart shares were down about 10% in after-hours trading.
The agency has sent the company a civil investigative demand, the sources said. The FTC is seeking information about Instacart’s Eversight pricing tool, one of the sources said.
The software, which allows retailers on Instacart to experiment with different prices using AI, drew criticism after a recent study showed different shoppers got different prices for the same groceries on Instacart.
“The Federal Trade Commission has a longstanding policy of not commenting on any potential or ongoing investigations. But, like so many Americans, we are disturbed by what we have read in the press about Instacart’s alleged pricing practices,” the FTC said in a statement.
The opening of a probe does not prove wrongdoing and not all FTC investigations result in lawsuits.
The FTC is taking on the issue of a company’s use of technology to set prices at a time when the high cost of living in the U.S. has been a top daily concern for Americans. The issue of affordability helped Democrats win several state and local elections in November, becoming a major political headwind for President Donald Trump and his Republican party.
Same product, different price
In a study involving 437 shoppers viewing Instacart prices in four cities saw wildly different prices for the same items sourced at the same stores. On average, there was a 7% difference in the total cost for the same grocery list at the same store, according to the study conducted by advocacy groups Groundwork Collaborative, Consumer Reports, and More Perfect Union.
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“Some shoppers found grocery prices that were up to 23% higher than prices available to other shoppers for the exact same items, in the exact same store, at the exact same time,” the study’s authors wrote.
Instacart’s Eversight allows retailers to run price tests to gauge shoppers’ reactions to higher or lower prices across different categories of items. Grocers who use Eversight see revenue growth of 1-3%, according to Instacart’s website.
The pricing tests carried out through Eversight were randomized, unlike pricing practices based on fluctuating demand or a user’s individual data and behaviors, Instacart said last week.
“This year, we’ve focused heavily on encouraging more retailers to move toward in-store and online price parity, working closely with partners to remove markups and align online prices with in-store,” the company said in a blog post last week.