Instacart will pay $60 million in restitution as part of a settlement over allegations by the U.S. Federal Trade Commission that it defrauded consumers with false advertising. The federal agency alleged that Instacart misled consumers by using illegal tactics, causing them to pay higher fees and denying them refunds.
The Federal Trade Commission (FTC) said Instacart's “free delivery” claims are misleading because customers are still required to pay a mandatory service fee that can amount to as much as 15% of the total order.
The agency also said the delivery platform's promise of a “100% satisfaction guarantee” is false because it suggests it will provide a full refund if consumers are not fully satisfied with their orders, which is typically not the case in the event of delivery delays or unprofessional service.
Additionally, Instacart hid a refund option in the “self-checkout” menu that consumers use to report problems with their orders, tricking people into thinking they could only get a credit toward a future order, not a refund, the FTC says.
The agency also said Instacart did not clearly disclose terms regarding the Instacart+ membership registration process. The sign-up process for a free trial of the subscription service did not disclose that consumers would be charged after the trial ended, which allowed Instacart to charge people without their informed consent. These consumers will receive 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 pricing and delivery terms,” said Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, in a statement. statement.
Instacart confirmed the wa settlement blog entry and denied “any allegations of misconduct.” The company also said it believed “the basis of the FTC's investigation was fundamentally flawed.”
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The settlement comes as Instacart is currently under fire for recent research which revealed that an AI-based pricing tool was causing some customers to receive different prices for the same products in the same stores. Instacart responded to the controversy by stating that retailers set their own prices and any pricing tests conducted using the AI tool are random and unaffected by user data. Reuters as reported Wednesday, the FTC has launched an investigation into the delivery platform's AI pricing tool.
