Instacart will pay $60 million in refunds to settle allegations by the U.S. Federal Trade Commission that it deceived consumers with false advertising. The federal agency alleged Instacart misled consumers with unlawful tactics, causing them to pay higher fees while also denying refunds.
The Federal Trade Commission (FTC) stated Instacart’s ‘free delivery’ claims are misleading because customers are still required to pay a mandatory service fee, which can add up to 15% to their total order.
The agency also said the delivery platform’s “100% satisfaction guarantee” promise is false because it implies it will provide full refunds when consumers are not fully satisfied with their orders, which is typically not the case when people receive late deliveries or unprofessional service.
Additionally, Instacart hid the refund option from the “self-service” menu that consumers use to report problems with their orders, making people believe they could only get a credit toward a future order rather than a refund, the FTC claimed.
Instacart also failed to clearly disclose terms relating to the Instacart+ membership enrollment process, the agency said. The sign-up process for the free trial of the subscription service did not disclose consumers would be charged once the trial ended, which allowed Instacart to charge people without their informed consent. These consumers will be receiving refunds as a result of the settlement, the FTC said.
“The FTC is focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, in a statement.
Instacart acknowledged the settlement in a blog post and denied “any allegations of wrongdoing.” The company also said it believes “the foundation of the FTC’s inquiry was fundamentally flawed.”
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The settlement comes as Instacart is currently under fire over a recent study that revealed its AI-powered pricing tool is causing some customers to receive different prices for the same items at the same stores. Instacart responded to the controversy by stating that retailers determine their own prices, and any pricing tests conducted through its AI tool are random and not influenced by user data. Reuters reported on Wednesday the FTC has begun an investigation into the delivery platform’s AI pricing tool.
