December 23, 2025 • 19 mins
This month, the think-tank the Groundwork Collaborative, Consumer Reports and the news nonprofit More Perfect Union released a report finding that Instacart had been using an AI tool to run algorithmic price experiments on shoppers around the country. As a result, shoppers were being charged different prices for the exact same items from the exact same stores.
At a time when inflation has driven grocery costs higher, the revelation that Instacart was charging some consumers more for the same goods struck a chord.
On today’s Big Take podcast, host Sarah Holder speaks with Bloomberg’s antitrust reporter Leah Nylen and the Groundwork Collaborative executive director Lindsay Owens about the report’s findings and impact — and Instacart’s decision to end their experiment.
Read more: Instacart to Pay $60 Million to Settle FTC Consumer Protection Case
Hosted by: Sarah Holder; Produced by: Rachael Lewis-Krisky; Reported by: Leah Nylen; Edited by: Naomi Shavin and Aaron Edwards; Fact-checking by: Julia Press; Engineering by: Katie McMurran.
Senior Producer: Naomi Shavin. Deputy Executive Producer: Julia Weaver. Executive Producer: Nicole Beemsterboer.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
One weekday this fall, thirty nine shoppers fired up the
grocery delivery service Instacart and filled their virtual carts. They
all put the same twenty items in there from the
same Seattle Safeway, wheat Thins, Heinz, Ketchup, Cheerios, Skippy peanut butter.
But when it came time to check out, the total
(00:30):
price of their baskets was different as much as nine
dollars and fifty nine cents different. One shoppers two dollars
ninety nine cent jar of peanut butter was another shopper's
three dollars and sixty nine cent jar of peanut butter.
Two identical boxes of wheatins could vary by as much
as ninety cents. Now, a few dollars here or there
(00:53):
might not sound like a lot, but over a year
of buying groceries, it can add up.
Speaker 1 (00:59):
Grocery are a major line item for most families budgets.
The other thing that's a problem for many families is
when pricing is so variable, your grocery budget starts to
feel really unpredictable.
Speaker 2 (01:12):
That's Lindsay Owens, the executive director of the Groundwork Collaborative,
a progressive economic policy think tank. This month, Groundwork released
an investigation with the organization Consumer Reports in partnership with
the news nonprofit more Perfect Union that found that instacart
has been using an AI tool to run algorithmic price
(01:33):
experiments on shoppers around the country, often without their knowledge,
at a time when inflation has driven grocery costs higher.
The revelation that instacart was charging some consumers more for
the same goods struck a court.
Speaker 1 (01:49):
A one to two dollars markup just from shopping online
versus in person just sounds crazy to me when you're
already doing the tip and having this service fee here.
Speaker 3 (01:58):
Obviously, this needs legislation, so let your representatives know that
this matters to you.
Speaker 1 (02:02):
But until we have that law, avoid in store apps.
Speaker 2 (02:06):
And it did get attention from lawmakers and regulators.
Speaker 1 (02:09):
That is instacart stock is falling this morning after Reuters
reported that the FTC sent the grocery delivery company a
civil investigation demands.
Speaker 2 (02:18):
The instacart said that it does not use any personal
demographic or user level behavior data to set prices, and
that prices weren't changing based on real time supply and demand. Instead,
they said that the price discrepancies were the result of
completely randomized ab testing, the kind of test retailers often
do to figure out how sensitive shoppers are to the
(02:41):
price of certain items. Still, the company said report raised concerns.
Quote at a time when families are working hard to
stretch their grocery budgets, customers should never have to question
the prices they see on Instacart, an instacart spokesperson told
us and this week the company need a big one
to eighty. Instacart is ending a program where customers saw
(03:04):
different prices for the same product ordered at the same
time from the same store.
Speaker 3 (03:09):
Oftentimes, you know, companies get criticized for things all the time.
It doesn't necessarily change their strategy.
Speaker 2 (03:14):
That's Leah Nylan, who covers antitrust for Bloomberg.
Speaker 3 (03:17):
But Instacart was pretty quick to sort of pull back
on this policy, given like the significant outcry that there
was in response.
Speaker 2 (03:25):
As more online retailers lean on AI to influence their
pricing strategy, the groundwork collaboratives Lindsay says Instacart's saga raises
new questions.
Speaker 1 (03:36):
How far can you take a pricing practice before you
touch the stove.
Speaker 2 (03:44):
I'm Sarah Holder, and this is the big take from
Bloomberg News today on the show what Happens when an
algorithm determines your grocery bill? How volunteer shoppers revealed Instacart's
invisible pricing practices and what came after the back. In
(04:10):
twenty twenty two, instacart acquired a company called ever Site
that offers AI powered pricing software.
Speaker 3 (04:17):
And what this did was it helped retailers, primarily grocery
stores like Kroger, Albertson's, Safeway, things like that set prices
for like sort of everyday grocery items.
Speaker 2 (04:30):
Leah Nylan, an antitrust reporter for Bloomberg, says the tool
has been controversial.
Speaker 3 (04:35):
They could increase the price if they thought, for example,
you were somebody who really needed an item, or you know,
were the sort of person who might not see a
price increase and walk away, so they could sort of
jack up the prices for certain people or lower them
for others. The sort of problematic thing about this tool
is as a consumer, you have no idea that Instacart
(04:58):
or the grocery store is even using.
Speaker 2 (05:00):
Earlier this year, researchers and analysts at the Groundwork Collaborative
and Consumer Reports decided to look closer at the grocery
delivery company's pricing strategy and how it could impact consumers.
Speaker 1 (05:12):
We were interested in this kind of concept of surveillance pricing,
this idea that companies are collecting data on us not
just to get better at advertising to us, but also
maybe to get better at overcharging us.
Speaker 2 (05:25):
Lindsay Owens, again, the executive director of the Groundwork Collaborative.
Speaker 1 (05:30):
We knew a little bit about what instacart was up
to because they have been reasonably transparent with one population
their investors. So they have talked about their pricing strategies
and their earnings calls. They have been transparent about the
types of technologies they were buying and perfecting in their
patent applications, and they have also talked a little bit
(05:52):
about this on their website and some of their marketing materials.
When they purchased Eversite in twenty twenty two, one of
the reasons they did so is because ever site offered
better technology for running the types of experiments we found.
So we knew that some sort of pricing experiments were
going on with instacart, but we wanted to understand was
(06:13):
it just a few pennies here, or was it something
that could really be contributing to the high cost of
groceries that so many families in America are frustrated about
right now. So we basically turned instacarts pricing experiments right
back around on them.
Speaker 2 (06:29):
Consumer Reports went to their network of members and asked
for volunteers to participate in an instacart shopping experiment. More
than four hundred people ended up participating.
Speaker 1 (06:41):
We said, okay, all of the consumers in the study,
you're going to all pick out the exact same eighteen
to twenty grocery items Wheat thins and Quaker oats and
Deli lunch meat. You're going to put them in your cart,
and then you're going to take screenshots of the prices
you're being offered for each of the items, and we
had our data set. What we found was pretty extraordinary.
(07:02):
These were not little differences. Sometimes one consumer was offered
a price twenty three percent higher than another consumer for
the exact same good at the exact same time.
Speaker 2 (07:14):
The total price for the consumer's baskets differed by an
average of about seven percent.
Speaker 1 (07:19):
So the best way to explain this if you and
I were standing in line at Target right now, and
we were holding the exact same box of cheerios. We
would expect to pay the same amount, right.
Speaker 2 (07:29):
Same store, same day, same item. Yep.
Speaker 1 (07:31):
Like, we're in line together, irl, right and you check
out your box costs four ninety nine, You're still bagging
your box. I check out next. My box is six
ninety nine. I look over at you and I'm like, wait,
how much did you pay? In you're four ninety nine?
And then we both look at the cashier, Wait, why
am I paying six ninety nine? If you and I
(07:52):
stepped out of line, fired up our phones, got on instacart,
got the same box of cheerios from that same pickup
location that we're standing in, there is a very good
chance that we would be offered different prices. We found
price variation on seventy five percent of the items in
the grocery carts, and we found that one hundred percent
(08:13):
of our secret shoppers got variable pricing at some point
during the experiment. So no one was immune and seventy
five percent of the items were offered at variable prices.
We're effectively part of this big experiment. Well.
Speaker 2 (08:29):
Lindsey also says that this isn't a niche issue. Grocery
delivery picked up during the pandemic, and a range of
people use the services today. In an instacart twenty twenty
five economic report, the company said that sixty eight percent
of its customers considered Instacart essential. App Trackers estimate instacart
has over fourteen million active users.
Speaker 1 (08:51):
Some people have kept up with it because they can't
get to the store, or maybe it's not accessible through
public transportation, maybe you know, have an injury or something
like that and can't sort of pick up your own groceries.
And also instacart allows shoppers to grocery shop at a
whole host of different outlets, low end grocers, discount grocers,
big box grocers, high end grocers. Right, so it really
(09:14):
covers the watershed of different consumer preferences. And so one
of the reasons why we felt like this study was
so important, but also we felt like our findings were
so problematic, is because this isn't sort of a niche market.
This really is increasingly a big part of the American
grocery experience.
Speaker 2 (09:33):
And what did you find about why or what could
explain whether a customer would get a higher or lower price.
Was there anything about the profiles of shoppers that would
inform what prices instacart was serving them, or was it random?
Speaker 1 (09:50):
So I think we have a couple of suggestive answers
to this. The first is we know from Instacart's own
public statements that part of the reason they do this
is just to test how much they can charge for
given items. So they're really conducting pricing sensitivity analyses figuring
out how high they can take Instacart's markup on top
(10:11):
of the retailer's price before you take an item out
of your cart, or close your computer and walk to
a brick and mortar grocery store. On our end, we
tested a whole host of demographic information to try to
see if we could predict which prices you would get
based on the information that we had. We didn't find
any statistically significant patterns, so we can't rule out that
(10:34):
it was random. However, we did find that people were
sorted into distinct price groups, so there were some people
who got higher prices pretty much across the board. There
were some people who got lower prices more often than not.
Speaker 2 (10:54):
According to the report, Instacart confirmed that the findings from
the tests accurately reflect pricing experiments and strategies. In a
statement to Groundwork and Consumer Reports, instacart said, just as
retailers have long tested prices in their physical stores to
better understand consumer preferences, a subset of only ten retail partners,
(11:15):
ones that already apply markups, do the same online via Instacart.
These limited, short term and randomized tests help retail partners
learn what matters most to consumers and how to keep
essential items affordable. But in statements, instacart also said that
there's been reporting that's inaccurately characterized the mechanisms behind some
(11:38):
of its pricing experiments, and Bloomberg's Leah Nyland says instacart
stress that the retailer is the one that sets the
base price of groceries they sell on the app. Retailers
often have their own reasons and strategies for engaging in
pricing experiments, as groceries have notoriously narrow profit margins.
Speaker 3 (11:56):
They felt that this study was sort of unfairly blaming
them for something that they don't have a lot of
control over.
Speaker 2 (12:01):
Another thing I thought was interesting in the statement that
they released was that they really reiterated that they weren't
using surveillance pricing. In other words, they weren't using customers
personal information to set prices that it was like random
ab testing. Can you explain further the difference between algorithmic
pricing and surveillance pricing and why do you think instacart
(12:22):
was so clear in making that distinction.
Speaker 3 (12:26):
Yeah, So when people think of the term surveillance pricing,
they generally think of a company that is taking a
lot of information about them and sort of coming up
with a price that is very personalized to them. So
they'll have all of these different characteristics and they will
use those particular things about you to set the price.
Instacart was saying, we weren't doing that. It's not like
(12:47):
we were like deciding that you as Jane Doe, and here,
you know, we have all this information about you and
so we were tailoring the price to you. We were
just like using various algorithms that sort of like are
testing various things about our app to see if maybe,
you know, like if we highlight this type of deal,
you're more likely to click on it. And the way
(13:08):
they do that is this thing called ab testing, where
they'll show one customer one thing and they'll show another
customer something slightly different, and then they see which one
is more effective for whatever it is that they're testing.
Speaker 2 (13:23):
Coming up, how price experiments started creeping into more industries,
and how lawmakers and regulators are responding like it or not.
(13:45):
Consumers are used to being experimented on, at least in
some arenas.
Speaker 3 (13:49):
You know, you sort of think when you're buying airline tickets,
you know, or maybe concert tickets or something, you know
that it's a good that there is a limited.
Speaker 2 (13:56):
Supply, right Bloomberg's Leah Nylan.
Speaker 3 (13:58):
There are only so many any seats on a flight,
so yeah, maybe like the price might go up when
there's like fewer seats left. You know. Concert tickets are
sort of notoriously you know, get expensive the more close
to the date that you get. But with groceries, you know,
there's sort of always been this idea that you go
into a grocery store and everybody gets charged to the
same price. Increasingly, like, grocery companies and other companies along
(14:23):
these lines are trying to change that, and they're very
interested in finding more and more details about people to
try and tailor the pricing towards them. They've been introducing
what they call electronic shelf labels at grocery store so
that they might even have an opportunity to change that
shelf price throughout the day. And I think that is
a surprise to just the regular average consumer because we're
(14:44):
not really expecting that. We are used to going into
the store and the price is the price.
Speaker 2 (14:50):
When the Groundwork Collaborative and Consumer Reports investigation revealed that
the grocery company Instacart was running its own pricing experiments,
many members of the public, we're taken aback. Yeah.
Speaker 3 (15:02):
From lawmakers and regulators, there was sort of a big
hue and outcry because this is something, at least from
the regulatory perspective, that they've been concerned about for a while.
They know that in this day and age, when there
is a lot of data about consumers out there, that
retailers are trying to find out this information about consumers
and do this sort of personalized pricing. But it raises
(15:23):
a lot of red flags because you don't know exactly
how various factors are increasing or decreasing the price. There
are various federal laws that prohibit you from raising or
lowering prices based on particular characteristics, So for example, you're
not supposed to charge people different prices based on race,
or sex, or religion or things like that. But when
(15:44):
it's a black box like this, like you don't know
exactly what factors the company is using to make the
decision about pricing. Among lawmakers, it was also sort of
a red flag because food is an essential thing, you know,
everyone has to eat, and especially at a time right
now when grocery prices have been such a touch point
with voters. It really did get a lot of lawmaker reaction.
Speaker 2 (16:07):
After the instacart report came out, members of Congress, including
Senator Chuck Schumer and Senator Amy Klobuchar, wrote letters to
Federal Trade Commission officials expressing their concerns. Reuters reported that
the FTC has sent inquiries to Instacart regarding its use
of AI enabled pricing tools. FDC Chair Andrew Ferguson posted
(16:27):
on x this week that the FDC quote began investigating
these potentially unlawful practices in the spring. With all this
new scrutiny on the role of technology in price setting,
I asked Leah about how long the issue has been
on regulator's radars.
Speaker 3 (16:44):
This is something that the Federal Trade Commission, which is
the US's primary consumer protection agency, has been concerned about
for a while. During the Biden administration, the FTC had
started an investigation into a lot of retailers. They have
this special power that they can ask retailers to sort
of turn over information for the purposes of a study.
So they had asked a bunch of major retailers to
(17:04):
do that, and then they were looking essentially at how
frequently they use these sort of algorithms to help determine pricing.
And that study is still underway. The Trump folks didn't
kill it upon coming into office, but we still don't
really have the results of that yet. And the FTC
in particular had already had an investigation into Instacart over
(17:24):
whether it's Instacart plus this is its membership program was
sufficiently transparent enough about its pricing and cancelation policies.
Speaker 2 (17:34):
And Instacart has to pay sixty million dollars back to
consumers as a result of that investigation.
Speaker 3 (17:39):
Yes, they're refunding consumers millions of dollars as a result
of this investigation because the FTC found that they weren't
being transparent enough about the terms of this membership program
and how people could cancel it, because the FTC found
that frequently people sort of didn't realize that they were
enrolled in this program and they would try and cancel,
and instead of giving them their money back to Instacart,
(18:01):
would give them a credit, which violates some consumer protection
laws about memberships.
Speaker 2 (18:07):
On Monday, Instacart announced that retailers would no longer be
able to use ever site software to run item price tests,
effective immediately now. The company said in a statement, if
two families are shopping for the same items at the
same time from the same store location on Instacart, they
see the same prices period. So Instacart announced they're stopping
(18:31):
this tactic, which marks one sort of resolution to this story.
But could what happened here with Instacart set a precedent
for other industries that are experimenting with this kind of
price setting.
Speaker 3 (18:43):
I do think that if anybody else is experimenting with
this price setting, they probably have seen what the sort
of criticism that Instacart got and are probably going to
be a little bit more reluctant to at least admit
that they are doing this, and or, you know, when
they get blowback a little bit more willing to pull
back on it. So it will be interesting to see,
(19:03):
you know, sort of as we go forward, how many
other companies to sort of try these types of tactics,
how transparent they are about that's what they're doing, and
sort of what the reaction is going forward. The basics
of consumer protection laws that you have to be very
transparent about what you are selling and at what price.
If you don't do that, the regulators will come after you.
Speaker 2 (19:33):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com Slash Podcast offer. Thanks for listening. We'll be
back tomorrow
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
One weekday this fall, thirty nine shoppers fired up the
grocery delivery service Instacart and filled their virtual carts. They
all put the same twenty items in there from the
same Seattle Safeway, wheat Thins, Heinz, Ketchup, Cheerios, Skippy peanut butter.
But when it came time to check out, the total
(00:30):
price of their baskets was different as much as nine
dollars and fifty nine cents different. One shoppers two dollars
ninety nine cent jar of peanut butter was another shopper's
three dollars and sixty nine cent jar of peanut butter.
Two identical boxes of wheatins could vary by as much
as ninety cents. Now, a few dollars here or there
(00:53):
might not sound like a lot, but over a year
of buying groceries, it can add up.
Speaker 1 (00:59):
Grocery are a major line item for most families budgets.
The other thing that's a problem for many families is
when pricing is so variable, your grocery budget starts to
feel really unpredictable.
Speaker 2 (01:12):
That's Lindsay Owens, the executive director of the Groundwork Collaborative,
a progressive economic policy think tank. This month, Groundwork released
an investigation with the organization Consumer Reports in partnership with
the news nonprofit more Perfect Union that found that instacart
has been using an AI tool to run algorithmic price
(01:33):
experiments on shoppers around the country, often without their knowledge,
at a time when inflation has driven grocery costs higher.
The revelation that instacart was charging some consumers more for
the same goods struck a court.
Speaker 1 (01:49):
A one to two dollars markup just from shopping online
versus in person just sounds crazy to me when you're
already doing the tip and having this service fee here.
Speaker 3 (01:58):
Obviously, this needs legislation, so let your representatives know that
this matters to you.
Speaker 1 (02:02):
But until we have that law, avoid in store apps.
Speaker 2 (02:06):
And it did get attention from lawmakers and regulators.
Speaker 1 (02:09):
That is instacart stock is falling this morning after Reuters
reported that the FTC sent the grocery delivery company a
civil investigation demands.
Speaker 2 (02:18):
The instacart said that it does not use any personal
demographic or user level behavior data to set prices, and
that prices weren't changing based on real time supply and demand. Instead,
they said that the price discrepancies were the result of
completely randomized ab testing, the kind of test retailers often
do to figure out how sensitive shoppers are to the
(02:41):
price of certain items. Still, the company said report raised concerns.
Quote at a time when families are working hard to
stretch their grocery budgets, customers should never have to question
the prices they see on Instacart, an instacart spokesperson told
us and this week the company need a big one
to eighty. Instacart is ending a program where customers saw
(03:04):
different prices for the same product ordered at the same
time from the same store.
Speaker 3 (03:09):
Oftentimes, you know, companies get criticized for things all the time.
It doesn't necessarily change their strategy.
Speaker 2 (03:14):
That's Leah Nylan, who covers antitrust for Bloomberg.
Speaker 3 (03:17):
But Instacart was pretty quick to sort of pull back
on this policy, given like the significant outcry that there
was in response.
Speaker 2 (03:25):
As more online retailers lean on AI to influence their
pricing strategy, the groundwork collaboratives Lindsay says Instacart's saga raises
new questions.
Speaker 1 (03:36):
How far can you take a pricing practice before you
touch the stove.
Speaker 2 (03:44):
I'm Sarah Holder, and this is the big take from
Bloomberg News today on the show what Happens when an
algorithm determines your grocery bill? How volunteer shoppers revealed Instacart's
invisible pricing practices and what came after the back. In
(04:10):
twenty twenty two, instacart acquired a company called ever Site
that offers AI powered pricing software.
Speaker 3 (04:17):
And what this did was it helped retailers, primarily grocery
stores like Kroger, Albertson's, Safeway, things like that set prices
for like sort of everyday grocery items.
Speaker 2 (04:30):
Leah Nylan, an antitrust reporter for Bloomberg, says the tool
has been controversial.
Speaker 3 (04:35):
They could increase the price if they thought, for example,
you were somebody who really needed an item, or you know,
were the sort of person who might not see a
price increase and walk away, so they could sort of
jack up the prices for certain people or lower them
for others. The sort of problematic thing about this tool
is as a consumer, you have no idea that Instacart
(04:58):
or the grocery store is even using.
Speaker 2 (05:00):
Earlier this year, researchers and analysts at the Groundwork Collaborative
and Consumer Reports decided to look closer at the grocery
delivery company's pricing strategy and how it could impact consumers.
Speaker 1 (05:12):
We were interested in this kind of concept of surveillance pricing,
this idea that companies are collecting data on us not
just to get better at advertising to us, but also
maybe to get better at overcharging us.
Speaker 2 (05:25):
Lindsay Owens, again, the executive director of the Groundwork Collaborative.
Speaker 1 (05:30):
We knew a little bit about what instacart was up
to because they have been reasonably transparent with one population
their investors. So they have talked about their pricing strategies
and their earnings calls. They have been transparent about the
types of technologies they were buying and perfecting in their
patent applications, and they have also talked a little bit
(05:52):
about this on their website and some of their marketing materials.
When they purchased Eversite in twenty twenty two, one of
the reasons they did so is because ever site offered
better technology for running the types of experiments we found.
So we knew that some sort of pricing experiments were
going on with instacart, but we wanted to understand was
(06:13):
it just a few pennies here, or was it something
that could really be contributing to the high cost of
groceries that so many families in America are frustrated about
right now. So we basically turned instacarts pricing experiments right
back around on them.
Speaker 2 (06:29):
Consumer Reports went to their network of members and asked
for volunteers to participate in an instacart shopping experiment. More
than four hundred people ended up participating.
Speaker 1 (06:41):
We said, okay, all of the consumers in the study,
you're going to all pick out the exact same eighteen
to twenty grocery items Wheat thins and Quaker oats and
Deli lunch meat. You're going to put them in your cart,
and then you're going to take screenshots of the prices
you're being offered for each of the items, and we
had our data set. What we found was pretty extraordinary.
(07:02):
These were not little differences. Sometimes one consumer was offered
a price twenty three percent higher than another consumer for
the exact same good at the exact same time.
Speaker 2 (07:14):
The total price for the consumer's baskets differed by an
average of about seven percent.
Speaker 1 (07:19):
So the best way to explain this if you and
I were standing in line at Target right now, and
we were holding the exact same box of cheerios. We
would expect to pay the same amount, right.
Speaker 2 (07:29):
Same store, same day, same item. Yep.
Speaker 1 (07:31):
Like, we're in line together, irl, right and you check
out your box costs four ninety nine, You're still bagging
your box. I check out next. My box is six
ninety nine. I look over at you and I'm like, wait,
how much did you pay? In you're four ninety nine?
And then we both look at the cashier, Wait, why
am I paying six ninety nine? If you and I
(07:52):
stepped out of line, fired up our phones, got on instacart,
got the same box of cheerios from that same pickup
location that we're standing in, there is a very good
chance that we would be offered different prices. We found
price variation on seventy five percent of the items in
the grocery carts, and we found that one hundred percent
(08:13):
of our secret shoppers got variable pricing at some point
during the experiment. So no one was immune and seventy
five percent of the items were offered at variable prices.
We're effectively part of this big experiment. Well.
Speaker 2 (08:29):
Lindsey also says that this isn't a niche issue. Grocery
delivery picked up during the pandemic, and a range of
people use the services today. In an instacart twenty twenty
five economic report, the company said that sixty eight percent
of its customers considered Instacart essential. App Trackers estimate instacart
has over fourteen million active users.
Speaker 1 (08:51):
Some people have kept up with it because they can't
get to the store, or maybe it's not accessible through
public transportation, maybe you know, have an injury or something
like that and can't sort of pick up your own groceries.
And also instacart allows shoppers to grocery shop at a
whole host of different outlets, low end grocers, discount grocers,
big box grocers, high end grocers. Right, so it really
(09:14):
covers the watershed of different consumer preferences. And so one
of the reasons why we felt like this study was
so important, but also we felt like our findings were
so problematic, is because this isn't sort of a niche market.
This really is increasingly a big part of the American
grocery experience.
Speaker 2 (09:33):
And what did you find about why or what could
explain whether a customer would get a higher or lower price.
Was there anything about the profiles of shoppers that would
inform what prices instacart was serving them, or was it random?
Speaker 1 (09:50):
So I think we have a couple of suggestive answers
to this. The first is we know from Instacart's own
public statements that part of the reason they do this
is just to test how much they can charge for
given items. So they're really conducting pricing sensitivity analyses figuring
out how high they can take Instacart's markup on top
(10:11):
of the retailer's price before you take an item out
of your cart, or close your computer and walk to
a brick and mortar grocery store. On our end, we
tested a whole host of demographic information to try to
see if we could predict which prices you would get
based on the information that we had. We didn't find
any statistically significant patterns, so we can't rule out that
(10:34):
it was random. However, we did find that people were
sorted into distinct price groups, so there were some people
who got higher prices pretty much across the board. There
were some people who got lower prices more often than not.
Speaker 2 (10:54):
According to the report, Instacart confirmed that the findings from
the tests accurately reflect pricing experiments and strategies. In a
statement to Groundwork and Consumer Reports, instacart said, just as
retailers have long tested prices in their physical stores to
better understand consumer preferences, a subset of only ten retail partners,
(11:15):
ones that already apply markups, do the same online via Instacart.
These limited, short term and randomized tests help retail partners
learn what matters most to consumers and how to keep
essential items affordable. But in statements, instacart also said that
there's been reporting that's inaccurately characterized the mechanisms behind some
(11:38):
of its pricing experiments, and Bloomberg's Leah Nyland says instacart
stress that the retailer is the one that sets the
base price of groceries they sell on the app. Retailers
often have their own reasons and strategies for engaging in
pricing experiments, as groceries have notoriously narrow profit margins.
Speaker 3 (11:56):
They felt that this study was sort of unfairly blaming
them for something that they don't have a lot of
control over.
Speaker 2 (12:01):
Another thing I thought was interesting in the statement that
they released was that they really reiterated that they weren't
using surveillance pricing. In other words, they weren't using customers
personal information to set prices that it was like random
ab testing. Can you explain further the difference between algorithmic
pricing and surveillance pricing and why do you think instacart
(12:22):
was so clear in making that distinction.
Speaker 3 (12:26):
Yeah, So when people think of the term surveillance pricing,
they generally think of a company that is taking a
lot of information about them and sort of coming up
with a price that is very personalized to them. So
they'll have all of these different characteristics and they will
use those particular things about you to set the price.
Instacart was saying, we weren't doing that. It's not like
(12:47):
we were like deciding that you as Jane Doe, and here,
you know, we have all this information about you and
so we were tailoring the price to you. We were
just like using various algorithms that sort of like are
testing various things about our app to see if maybe,
you know, like if we highlight this type of deal,
you're more likely to click on it. And the way
(13:08):
they do that is this thing called ab testing, where
they'll show one customer one thing and they'll show another
customer something slightly different, and then they see which one
is more effective for whatever it is that they're testing.
Speaker 2 (13:23):
Coming up, how price experiments started creeping into more industries,
and how lawmakers and regulators are responding like it or not.
(13:45):
Consumers are used to being experimented on, at least in
some arenas.
Speaker 3 (13:49):
You know, you sort of think when you're buying airline tickets,
you know, or maybe concert tickets or something, you know
that it's a good that there is a limited.
Speaker 2 (13:56):
Supply, right Bloomberg's Leah Nylan.
Speaker 3 (13:58):
There are only so many any seats on a flight,
so yeah, maybe like the price might go up when
there's like fewer seats left. You know. Concert tickets are
sort of notoriously you know, get expensive the more close
to the date that you get. But with groceries, you know,
there's sort of always been this idea that you go
into a grocery store and everybody gets charged to the
same price. Increasingly, like, grocery companies and other companies along
(14:23):
these lines are trying to change that, and they're very
interested in finding more and more details about people to
try and tailor the pricing towards them. They've been introducing
what they call electronic shelf labels at grocery store so
that they might even have an opportunity to change that
shelf price throughout the day. And I think that is
a surprise to just the regular average consumer because we're
(14:44):
not really expecting that. We are used to going into
the store and the price is the price.
Speaker 2 (14:50):
When the Groundwork Collaborative and Consumer Reports investigation revealed that
the grocery company Instacart was running its own pricing experiments,
many members of the public, we're taken aback. Yeah.
Speaker 3 (15:02):
From lawmakers and regulators, there was sort of a big
hue and outcry because this is something, at least from
the regulatory perspective, that they've been concerned about for a while.
They know that in this day and age, when there
is a lot of data about consumers out there, that
retailers are trying to find out this information about consumers
and do this sort of personalized pricing. But it raises
(15:23):
a lot of red flags because you don't know exactly
how various factors are increasing or decreasing the price. There
are various federal laws that prohibit you from raising or
lowering prices based on particular characteristics, So for example, you're
not supposed to charge people different prices based on race,
or sex, or religion or things like that. But when
(15:44):
it's a black box like this, like you don't know
exactly what factors the company is using to make the
decision about pricing. Among lawmakers, it was also sort of
a red flag because food is an essential thing, you know,
everyone has to eat, and especially at a time right
now when grocery prices have been such a touch point
with voters. It really did get a lot of lawmaker reaction.
Speaker 2 (16:07):
After the instacart report came out, members of Congress, including
Senator Chuck Schumer and Senator Amy Klobuchar, wrote letters to
Federal Trade Commission officials expressing their concerns. Reuters reported that
the FTC has sent inquiries to Instacart regarding its use
of AI enabled pricing tools. FDC Chair Andrew Ferguson posted
(16:27):
on x this week that the FDC quote began investigating
these potentially unlawful practices in the spring. With all this
new scrutiny on the role of technology in price setting,
I asked Leah about how long the issue has been
on regulator's radars.
Speaker 3 (16:44):
This is something that the Federal Trade Commission, which is
the US's primary consumer protection agency, has been concerned about
for a while. During the Biden administration, the FTC had
started an investigation into a lot of retailers. They have
this special power that they can ask retailers to sort
of turn over information for the purposes of a study.
So they had asked a bunch of major retailers to
(17:04):
do that, and then they were looking essentially at how
frequently they use these sort of algorithms to help determine pricing.
And that study is still underway. The Trump folks didn't
kill it upon coming into office, but we still don't
really have the results of that yet. And the FTC
in particular had already had an investigation into Instacart over
(17:24):
whether it's Instacart plus this is its membership program was
sufficiently transparent enough about its pricing and cancelation policies.
Speaker 2 (17:34):
And Instacart has to pay sixty million dollars back to
consumers as a result of that investigation.
Speaker 3 (17:39):
Yes, they're refunding consumers millions of dollars as a result
of this investigation because the FTC found that they weren't
being transparent enough about the terms of this membership program
and how people could cancel it, because the FTC found
that frequently people sort of didn't realize that they were
enrolled in this program and they would try and cancel,
and instead of giving them their money back to Instacart,
(18:01):
would give them a credit, which violates some consumer protection
laws about memberships.
Speaker 2 (18:07):
On Monday, Instacart announced that retailers would no longer be
able to use ever site software to run item price tests,
effective immediately now. The company said in a statement, if
two families are shopping for the same items at the
same time from the same store location on Instacart, they
see the same prices period. So Instacart announced they're stopping
(18:31):
this tactic, which marks one sort of resolution to this story.
But could what happened here with Instacart set a precedent
for other industries that are experimenting with this kind of
price setting.
Speaker 3 (18:43):
I do think that if anybody else is experimenting with
this price setting, they probably have seen what the sort
of criticism that Instacart got and are probably going to
be a little bit more reluctant to at least admit
that they are doing this, and or, you know, when
they get blowback a little bit more willing to pull
back on it. So it will be interesting to see,
(19:03):
you know, sort of as we go forward, how many
other companies to sort of try these types of tactics,
how transparent they are about that's what they're doing, and
sort of what the reaction is going forward. The basics
of consumer protection laws that you have to be very
transparent about what you are selling and at what price.
If you don't do that, the regulators will come after you.
Speaker 2 (19:33):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com Slash Podcast offer. Thanks for listening. We'll be
back tomorrow
Hosts And Creators
Sarah Holder
Saleha Mohsin
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