The news comes the same day reports surfaced that the FTC is also investigating Instacart’s pricing practices, following a report that found the company was charging some customers nearly 25% more for the same products. Instacart claims that the differences in prices stem from experiments run in partnership with a small number of stores, and that the prices were randomized rather than determined based on customers’ demographics or personal information.
Now, Instacart is settling separate allegations made in the FTC lawsuit filed Thursday in a federal court in San Francisco.
Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in a press release, “Instacart misled consumers by advertising free delivery services – and then charging consumers to deliver groceries – and failing to tell consumers who signed up for the free trial that they would automatically be enrolled in its membership program.”
The lawsuit alleges that Instacart falsely promoted “free delivery” for a customer’s first order, even though shoppers were still required to pay a mandatory service fee that could add up to 15% to the total cost. That fee was also not clearly disclosed to customers.
The FTC also accused Instacart of falsely advertising a “100% satisfaction guarantee”, meaning customers can get a full refund. In fact, shoppers who experienced late delivery or poor service were often given only a small credit toward a future order. Additionally, Instacart hid the refund option from the app’s “self-service” menu, leaving many people feeling a credit was their only option.
Finally, Instacart was accused of not clearly disclosing that at the end of the free trial for its Instacart+ membership, customers would automatically begin being charged. As a result, many purchasers were billed without consenting to enroll in the program.
“We deny any allegations of wrongdoing by the Federal Trade Commission, and we stand firmly behind the integrity and transparency of our programs,” an Instacart spokesperson told Gizmodo in an email statement.
The spokesperson said Instacart offers “direct marketing, transparent pricing and fees, clear terms, easy cancellations and generous refund policies,” which are compliant with the law and follow industry norms.
Under the terms of the settlement, Instacart will refund $60 million and is now prohibited from misrepresenting delivery costs or satisfaction guarantees. The company must also clearly disclose the terms and obtain consumers’ explicit consent to a subscription fee that automatically renews unless the buyer opts out.
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