Instacart to Pay $60M to Settle FTC Deception Claims

Online grocery delivery giant Instacart has agreed to pay $60 million in consumer refunds to settle allegations by the U.S. Federal Trade Commission (FTC) that it engaged in deceptive practices, misleading customers with false advertising and unlawful tactics. The federal agency accused Instacart of causing consumers to pay higher fees while also denying legitimate refunds.

The FTC outlined several key areas of alleged deception:

• Misleading "Free Delivery" Claims: Instacart's promises of "free delivery" were deemed misleading because customers were still required to pay a mandatory service fee, which could add up to 15% to their total order.
• False "100% Satisfaction Guarantee": The agency stated Instacart's "100% satisfaction guarantee" was false. It implied full refunds for unsatisfied customers, but this was often not the case for issues like late deliveries or unprofessional service.
• Hidden Refund Options: Instacart allegedly obscured the refund option within its "self-service" menu, making consumers believe they could only receive a credit for future orders rather than a direct refund for problems.
• Undisclosed Instacart+ Membership Charges: The company failed to clearly disclose the terms of its Instacart+ membership enrollment. The sign-up process for the free trial did not adequately inform consumers that they would be charged once the trial period ended, leading to charges without informed consent. The FTC confirmed that these affected consumers would receive refunds as part of the settlement.

"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.

In a blog post, Instacart acknowledged the settlement but denied "any allegations of wrongdoing," asserting that it believes "the foundation of the FTC's inquiry was fundamentally flawed."

This settlement comes as Instacart faces additional scrutiny. The company is currently under fire following a recent study revealing that its AI-powered pricing tool may be charging some customers different prices for identical items at the same stores. Instacart has responded by stating that retailers determine their own prices and that any pricing tests conducted via its AI tool are random and not influenced by user data. However, Reuters reported that the FTC has initiated a separate investigation into the delivery platform's AI pricing tool.