Shares of grocery delivery service Instacart dropped about 7% in extended trading on Wednesday, following a report that said the U.S. Federal Trade Commission has begun an investigation into the company’s pricing practices.
The FTC sent a civil investigative demand to Instacart, Reuters reported, citing unnamed people.
“The Federal Trade Commission has a longstanding policy of not commenting on any potential or ongoing investigations,” the FTC told CNBC in a statement. “But, like so many Americans, we are disturbed by what we have read in the press about Instacart’s alleged pricing practice.”
A study released last week showed that prices for the same products in the same supermarkets that work with Instacart can vary by around 7%, which can result in over $1,000 in extra annual costs for customers. Instacart responded by saying that retailers determine prices listed in the app.
In 2022, Instacart spent $59 million to acquire Eversight, a company specializing in artificial intelligence-driven pricing and promotions for retailers and consumer packaged goods. Instacart sought to “create compelling savings opportunities for customers in real-time” with Eversight, according to a regulatory filing.
Instacart declined to comment on the investigation but said reporting has mischaracterized its pricing system.
“Much of what’s been reported has mischaracterized how pricing works on Instacart,” a company spokesperson said in an email. “First, our retail partners control their pricing strategies, and we work with them to align their online and in-store pricing wherever possible. Second, these tests are not dynamic pricing nor surveillance pricing – prices on Instacart do not change in real time nor are they based on supply or demand, and we never use personal, demographic, or user-level behavioral data to set item prices.
“These tests are a form of randomized A/B testing, similar to the way retailers have long run pricing tests between different stores.”
Earlier on Wednesday, Robert Garcia, a U.S. House Democrat from California, sent a letter to Instacart CEO Chris Rogers asking for a report on how the company sets prices.
“It is unconscionable that corporations are adding to Americans’ financial strain with algorithmic — and potentially surveillance — pricing,” wrote Garcia, who is ranking member of the House Committee on Oversight and Government Reform.
— CNBC’s Annie Palmer contributed to this report
