Instacart to Pay $60M to Settle FTC Deceptive Practices Claims

Instacart Settlement with FTC Over Deceptive Practices

Instacart will be issuing $60 million in refunds following allegations brought forth by the U.S. Federal Trade Commission (FTC) concerning misleading advertising practices.

Misleading "Free Delivery" Claims

The FTC asserted that Instacart engaged in unlawful tactics that resulted in consumers paying inflated fees and being unjustly denied refunds.

Specifically, the FTC contends that claims of “free delivery” were deceptive. Customers were still obligated to pay a mandatory service fee, potentially increasing their total order cost by as much as 15%.

False Satisfaction Guarantee

The agency also challenged Instacart’s “100% satisfaction guarantee.”

This guarantee implied full refunds would be provided for any dissatisfaction, which was not consistently the case, particularly regarding late deliveries or subpar service.

Hidden Refund Options

Instacart allegedly concealed the refund option within its self-service menu.

This concealment led consumers to believe their only recourse for order issues was a credit towards a future purchase, rather than a direct refund, according to the FTC.

Lack of Transparency in Membership Enrollment

The FTC further stated that Instacart failed to adequately disclose the terms of its Instacart+ membership enrollment.

The sign-up process for the free trial did not clearly inform consumers they would be automatically charged upon the trial’s conclusion, resulting in charges without explicit consent.

Refunds will be issued to affected consumers as part of the settlement.

FTC Statement on Online Delivery Services

“The FTC is focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms,” stated Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection.

Instacart's Response

Instacart acknowledged the settlement in a blog post but maintained its denial of any wrongdoing.

The company expressed its belief that “the foundation of the FTC’s inquiry was fundamentally flawed.”

Ongoing Investigation into AI Pricing Tool

This settlement arrives amidst scrutiny regarding a recent study revealing that Instacart’s AI-powered pricing tool may be displaying varying prices for identical items at the same stores to different customers.

Instacart responded by asserting that retailers independently set prices and that any pricing tests conducted through its AI tool are randomized and not based on user data.

Reuters reported on Wednesday that the FTC has initiated an investigation into Instacart’s AI pricing tool.