Instacart is set to pay $60 million in refunds to consumers after settling claims brought by the Federal Trade Commission (FTC). The FTC claimed the company used deceptive tactics regarding advertised delivery prices and automatic subscription enrollment.
The FTC’s complaint, filed yesterday, accused Instacart of engaging in multiple deceptive actions that ultimately raised costs for customers. This massive settlement means Instacart is now under a court-ordered mandate to overhaul its marketing transparency and provide straightforward terms for its membership programs.
One of the biggest issues was the so-called “free delivery.” Instacart routinely advertised free delivery for first orders, but customers were still hit with mandatory service fees that could add anywhere from 7.5 percent up to 15 percent to the total order cost. Those service fees were hidden until the checkout screen, meaning customers spent valuable time shopping before realizing delivery wasn’t actually free. Instacart’s own internal research noted that consumers “felt the free first delivery offer was a bait-and-switch” because they don’t differentiate between a “delivery fee” and a “service fee.”
Then there’s the issue of the Instacart+ membership. The FTC alleged that the company used unlawful negative option marketing, failing to clearly and conspicuously disclose to customers who signed up for a free trial that they would be automatically charged the annual membership fee, typically $99 per year, at the end of the trial period. This resulted in hundreds of thousands of users being charged without their express informed consent.
Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, laid out the problem perfectly. Mufarrige noted that by burying the lead on mandatory fees and masking the auto-renewal process, Instacart effectively prevented customers from making informed choices about the true cost of the service.
Beyond the delivery fees and subscription traps, the FTC also took issue with the company’s “100% satisfaction guarantee.” Turns out that guarantee was often illusory. If you had a late delivery or unprofessional service, Instacart typically offered only a small credit toward a future order, rather than a full refund. Even worse, the company allegedly hid the full refund option from its self-service menus, pushing dissatisfied customers toward accepting a credit they might only use if they placed another order, which is a pretty shady way to boost retention.
For its part, Instacart denies any wrongdoing. A company spokesperson said that they “flatly deny any allegations of wrongdoing by the Federal Trade Commission” and stand behind the transparency of their programs. They claim they settled only to “move forward and remain focused on delivering value.” Under the proposed order, Instacart must now clearly disclose all subscription terms and stop misrepresenting delivery costs.
It’s important to note this settlement is separate from another major issue Instacart is currently facing: investigations into its pricing practices. The FTC is reportedly still probing Instacart’s use of its Eversight AI pricing tool. The study highlighted instances where two people, standing in the same aisle at the same time, were quoted prices that varied by nearly a quarter of the total cost.
Regardless of the ongoing AI pricing probe, this $60 million refund settlement means that if you were charged for an Instacart+ membership without your express consent, you can expect to get that money back soon. Hopefully, this forces a much-needed push toward transparency in the entire online delivery sector.
Source: FTC via BleepingComputer
