Instacart will pay $60 million in refunds to settle allegations by the US Federal Trade Commission that it deceived consumers with false advertising. The federal agency alleged that Instacart misled consumers with illegal tactics, forced them to pay higher fees, and denied refunds.
The Federal Trade Commission (FTC) said Instacart’s claims of “free delivery” are misleading because customers are still required to pay a mandatory service fee, which can add up to 15% to their order total.
The agency also said the delivery platform’s promise of a “100% satisfaction guarantee” is false because it implies it will provide full refunds when consumers are not fully satisfied with their orders, which is not usually the case when people receive late deliveries or unprofessional service.
Additionally, Instacart hid the refund option from the self-service menu that consumers use to report problems with their orders, leading people to believe they could only receive a credit toward a future order and not a refund, the FTC alleged.
Instacart also failed to clearly disclose terms related to the Instacart+ membership sign-up process, the agency said. The sign-up process for the 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. Those 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 compete transparently on price and delivery terms,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection. a statement.
Instacart recognized the facility in a blog post and denied “any allegations of wrongdoing.” The company also said it believes “the basis of the FTC’s investigation was fundamentally flawed.”
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The settlement comes as Instacart comes under fire for a recent study which revealed that its AI pricing tool is 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 that any pricing tests conducted through the AI tool are random and not influenced by user data. Reuters reported Wednesday that the FTC has launched an investigation into the delivery platform’s AI pricing tool.
