Instacart Inc. (CART) is learning that artificial intelligence can be a double-edged sword. Shares dropped 6.64% in premarket trading Thursday after Reuters reported that the Federal Trade Commission has launched an investigation into the company's AI-powered pricing tool.

The Algorithm Under Scrutiny

The FTC has issued a civil investigative demand to Instacart, requesting information about its Eversight pricing tool, according to the Wednesday report. The company did not immediately respond to requests for comment.

Here's how the tool works: It helps retailers test different pricing strategies to understand how shoppers respond. According to Instacart, grocers using the tool have seen revenue growth of 1-3%. Sounds great for retailers, but there's a catch that's caught regulators' attention.

The AI-driven tool has raised eyebrows after research revealed that different shoppers were being charged varying prices for identical items. A study conducted by Groundwork Collaborative and Consumer Reports involving 437 shoppers across four cities uncovered significant price disparities. Some shoppers were paying up to 23% more than others for the exact same items at the same stores.

That's not exactly the kind of personalization customers appreciate.

Part of a Bigger Crackdown

The investigation into Instacart's pricing practices doesn't exist in a vacuum. It's part of a broader push by the Trump administration to crack down on alleged price manipulation throughout the U.S. food supply chain.

Earlier this month, President Donald Trump ordered a probe into major meatpacking companies for alleged price manipulation, raising concerns about foreign ownership and market distortions affecting both U.S. ranchers and consumers. That was followed by an executive order establishing food-supply-chain security task forces within the Justice Department and the FTC to tackle risks from price fixing and other anti-competitive practices.

So Instacart finds itself caught up in a much larger regulatory moment focused on how Americans pay for food.

The Business Is Still Growing

Despite the regulatory headwinds, Instacart's underlying business appears healthy. The company posted a 10% rise in both revenue and gross transaction value for the third quarter, beating analyst estimates. CEO Fidji Simo emphasized the company's focus on affordability and highlighted its enterprise platform as a key growth area moving forward.

Market data shows mixed signals for the stock's momentum. Instacart ranks in the 49th percentile for momentum and the 57th percentile for value, reflecting average performance in both categories.

On a year-to-date basis, Instacart stock has climbed 5.82%. On Thursday, shares rose 0.18% to close at $45.65 before the premarket selloff on Friday.