New York Demands Information From Instacart About Algorithmic Pricing Experiments

New York State Attorney General Letitia James said Thursday (Jan. 8) that she demanded information from Instacart about its use of algorithmic pricing and price-setting experiments and that she warned the company that it may be violating the state’s law.

James sent a letter to Instacart seeking detailed information about the experiments after Groundwork Collaborative and Consumer Reports released a study in December that found that the company was showing different shoppers different prices for the same product, according to a press release issued Thursday by the Office of the New York State Attorney General.

In her letter, James also warned Instacart that it may be violating New York’s Algorithmic Pricing Disclosure Act, which took effect Nov. 10 and requires companies that use algorithmic pricing to include a clear disclosure prominently displayed near prices.

“New Yorkers deserve fair prices and clear disclosures about how companies are using their personal information,” James said in the release. “Instacart’s pricing experiments raise serious concerns about its use of algorithmic pricing, and I will not hesitate to take action to enforce our laws and protect consumers.”

Reached by PYMNTS, an Instacart spokesperson said in an emailed statement that the company ended all item price testing in December.

“These tests were not personalized or surveillance pricing, as we never used personal, demographic or behavioral data to set online item prices on Instacart,” the statement said. “We believe we are in full compliance with New York’s Algorithmic Pricing Disclosure Act, and we are committed to leading with industry best practices in this area.

“We look forward to responding to the Attorney General’s questions to further clear up any misunderstandings about our prior and current practices,” the statement said.

Instacart said in a Dec. 22 blog post that it was suspending its price testing practice. The company said in the post that while some news coverage included misconceptions and misinformation about its pricing, the company fell short of customer expectations.

Reuters reported Dec. 17, citing unnamed sources, that the Federal Trade Commission (FTC) sent Instacart a civil investigative demand asking about the company’s artificial intelligence (AI) pricing tool.

The FTC said at the time in a statement: “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.”