Report Exposes Instacart's Hidden AI Price Experiments That Could Cost Families $1,200 Per Year - Lemmy.zip
cross-posted from: https://hexbear.net/post/6989654
[https://hexbear.net/post/6989654] cross-posted from:
https://news.abolish.capital/post/12537
[https://news.abolish.capital/post/12537]
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Consumer advocates on Tuesday called on the Federal Trade Commission and
state officials to investigate artificial intelligence-enabled pricing
experiments used by Instacart, the grocery shopping app millions of Americans
rely on, that charge up to 23% more for some shoppers than others when they buy
the same item at the same store. Consumer Reports joined the advocacy
group Groundwork Collaborative and the labor-focused media organization More
Perfect Union to uncover
[https://groundworkcollaborative.org/news/new-report-exposes-instacarts-hidden-price-games/]
Instacart’s pricing experiments enabled by Eversight, an AI pricing software
that Instacart acquired in 2022. The company’s CEO said last year that the
experiments have helped the company “to really figure out which categories of
products our customers [are] more price sensitive on"—in other words, to tailor
prices based on a customer’s shopping habits, whether they’re near a competing
store, and other factors. The groups’ study, Same Cart, Different Price
[https://groundworkcollaborative.org/work/instacart/], describes how researchers
ran five tests with 437 participants, studying the prices of a basket of items
bought at two Target stores and three Safeway stores using Instacart. In
one test at a Safeway in Washington, DC, shoppers logged on to the app to buy a
carton of eggs from the same brand at the same time and found that the price
they were given varied widely. Some shoppers were charged just $3.99 for the
eggs, while others saw a price as high as $4.79—20% higher. Shoppers at
a Safeway in Seattle saw a 23% difference in prices for Skippy peanut butter,
Oscar Mayer turkey, and Wheat Thins crackers. At two different Safeways in
Washington, DC, Instacart quoted shoppers at one store a price that was 23%
higher than at another for Signature Select Corn Flakes. “It’s time for
Instacart to close the lab. Americans shopping for groceries aren’t guinea pigs
and shouldn’t have to pay an Instacart tax.” For the same basket of
groceries, shoppers at the Seattle store were asked to pay as much as $123.93,
while others were charged just $114.34. “The average price variations
observed in the study could cost a household of four about $1,200 per year,”
said Groundwork. Justin Brookman, director of tech policy at Consumer
Reports, said
[https://groundworkcollaborative.org/news/new-report-exposes-instacarts-hidden-price-games/]
Instacart’s tactics “hurt families who are simply trying to purchase essential
groceries.” “At a time when everyday Americans are struggling with high
prices, it is particularly egregious to see corporations secretly conducting
individual experiments to see how much a person is willing to pay,” said
Brookman. “Companies must 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.” Groundwork noted that
Instcart’s website acknowledges that it runs price tests, but states that
“shoppers are not aware that they’re in an experiment” and are having their
grocery prices selected for them via algorithm. While Instacart has
claimed its price experiments are “negligible,” the groups emphasized that
they’re being used “against the backdrop of the fastest increase in food prices
since the late 1970s.” After previous reporting on companies’ use of
“shrinkflation [https://www.commondreams.org/news/shrinkflation],” “dynamic
pricing [https://www.commondreams.org/news/kroger-ai],” and other practices
[https://www.commondreams.org/news/corporate-profits] that keep prices high even
as pandemic-era labor and supply chain issues have subsided, “today’s report
shows Instacart’s experiments are yet another way corporate pricing tactics are
squeezing American families,” said Groundwork. The study did not find
evidence that Instacart is giving shoppers different prices based on their ZIP
code or income, as companies like Amazon, Delta Air Lines, and Home Deport have
been accused of doing. But the groups said Eversight gives the company
the capability to use that data to make pricing decisions tailored to particular
shoppers. “Instacart is quietly running pricing experiments on millions
of shoppers during the worst grocery affordability crisis in a generation, and
it’s costing households as much as $1,200 a year,” said Groundwork Collaborative
executive director Lindsay Owens. “They have turned the simple act of buying
groceries into a high-tech game of pricing roulette. When the same box of Wheat
Thins can jump 23% in price because of an algorithm, that’s not innovation or
convenience, it’s unfair. It’s time for Instacart to close the lab. Americans
shopping for groceries aren’t guinea pigs and shouldn’t have to pay an Instacart
tax.” The groups credited some state and federal lawmakers who have
begun to take notice of pricing practices like Instacart’s; US Rep. Greg Casar
(D-Texas) introduced
[https://www.commondreams.org/news/casar-tlaib-ai-price-gouging] the Stop AI
Price Gouging and Wage Fixing Act in July with the aim of prohibiting the use of
automated systems to set prices. New York has enacted the first-of-its-kind
Algorithmic Pricing Disclosure Act, which requires companies to prominently
disclose to customers, “This price was set by an algorithm using your personal
data” when they use methods like Instacart’s. Other state legislation has been
introduced in Colorado, California, and Pennsylvania to ban the use of
surveillance to set prices. The groups called on the FTC to take action
under Section 5 of the Federal Trade Commission Act, which bans “unfair methods
of competition.” Those could include “‘price discrimination not justified by
differences in cost or distribution,’ which appears to match Instacart’s pricing
experiments and fluctuations,” the report reads. The FTC could also
bring enforcement cases or initiate rulemaking to officially label AI-enabled
pricing strategies as an “unfair or deceptive practice,” affirming that
companies who use them are breaking a consumer protection standard.
“Fair and honest markets are the bedrock of a healthy economy,” reads Tuesday’s
report. “Companies like Instacart offer great convenience, but they are
increasingly pursuing corporate pricing practices that unfairly decouple the
price of a product from its true cost. 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.”
— From Common Dreams [https://www.commondreams.org/feeds/news.rss] via
This RSS Feed [https://www.commondreams.org/feeds/news.rss].
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