Instacart to pay $60 million to settle claims it deceived customers with false advertising
Delivery services have become a crucial part of everyday life as people rely on them to get everything from essentials to food at their doorstep. But shady practices by the companies that provide these services leave consumers vulnerable. One of them is Instacart, which has agreed to a $60 million settlement with the Federal Trade Commission (FTC) for its deceptive practices. The allegations include misleading consumers about delivery costs, false advertising of free delivery, and charging membership fees without informed consent. The settlement, approved by the FTC, mandates consumer refunds. Instacart's misleading trial enrollment process and restrictive refund policies resulted in charges for hundreds of thousands of consumers without corresponding benefits. The FTC is also scrutinizing Instacart's pricing practices related to its Eversight tool. The settlement requires clear cost disclosures and explicit consent for subscription services, although Instacart did not admit any wrongdoing.
"Instacart misled consumers by advertising free delivery services — and then charging consumers to have groceries delivered — and failing to disclose to consumers that signed up for a free trial that they would be automatically enrolled into its subscription program," Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, stated as reported by CBS News. Since a "service fee" was necessary, the FTC charged Instacart with deceptive advertising for claiming free delivery for first-time customers. Furthermore, it is alleged that Instacart violated its "100% satisfaction guarantee," deceiving clients about refunds for unsatisfactory purchases and only providing modest credits for unfinished or delayed orders. Additional allegations claimed that Instacart also charged consumers for Instacart+ subscriptions, offering delivery perks without their consent.
Instacart defended itself with a statement sent to the publication explaining that the company provided "straightforward marketing, transparent pricing and fees, clear terms, easy cancellation, and generous refund policies — all in full compliance with the law and exceeding industry norms." "We flatly deny any allegations of wrongdoing by the Federal Trade Commission, and we stand firmly behind the integrity and transparency of our programs. This settlement allows us to move forward and remain focused on delivering value for our customers, shoppers, and retail and brand partners in the communities we serve," an Instacart spokesperson said.
The settlement requires the grocery service to get customer agreement for Instacart membership enrollments and to refrain from misrepresenting delivery charges or satisfaction assurances. The FTC also criticized Instacart's technology testing, which could result in different consumers paying varying prices for the same groceries. However, Instacart stated that its eleven store partners use this pricing strategy as a typical way to align consumer preferences. CNBC reported that after a study revealed that Instacart's algorithm-driven pricing techniques caused customers to pay different prices for comparable items, the FTC opened an investigation into the company.
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