Instacart’s price testing controversy isn’t over

New York Attorney General Letitia James is demanding more information about Instacart’s recent, and highly controversial, price tests, and suggesting that the scheme—which saw customers charged notably different prices for the same products, when offered at the same stores—might have violated a new state law.

Late last year, Consumer Reports and the Groundwork Collaborative released an investigation that found that a single item posted on Instacart could have as many as five different prices, and that costs for a single item could range from just seven cents to $2.56. The investigation found that while some prices changed, and some differed only marginally, for some items—including Oscar Mayer turkey and Skippy peanut butter—they could vary by more than 20 percent.

In response to the widespread outcry and accusations that Instacart had deployed surveillance pricing, the company turned off technology that, it argued, had sought only to allow retailers who wanted to experiment with prices offered at their own stores. Instacart denied ever using demographic information to set prices, or using “dynamic pricing or surveillance pricing.” “Pricing is complex, and retailers have long used different approaches across different markets,” wrote the company in a blog. “Just as prices can vary between physical store locations, retail partners may continue to vary item prices on a store-by-store basis on Instacart.”

In a letter sent on Thursday, the New York attorney general’s office suggests that Instacart’s test may have violated a new state law, the Algorithmic Pricing Disclosure Act. The legislation went into effect in November and bans platforms from using algorithmic pricing without clear, prior disclosure to customers. It’s one of the first laws in the country that requires companies to be this transparent.

New York is accusing Instacart of burying its disclosures. In the letter, the attorney general’s office says that Instacart’s “disclosure on a page linked to certain retail stores’ front pages” was “accessed by clicking fine print text” and wasn’t “clear and conspicuous.” Moreover, the office argues the prices didn’t appear on “category pages listing product prices” or “on individual product pages displaying price,” as required by law.

New York is now asking for more details from Instacart about its price setting agreements, the tools the company used to control displayed prices, and information about its efforts to meet the standards set out in New York law.

“Charging different prices for the exact same products leaves shoppers feeling cheated and threatens to raise costs at a time when consumers are already paying too much at the grocery store,” James said in a statement. “Instacart’s pricing experiments raise serious concerns about its use of algorithmic pricing.”