Delivery company Instacart will pay $60 million in customer refunds under a settlement reached with the Federal Trade Commission over alleged deceptive practices.
The FTC said Thursday that Instacart has been falsely advertising free deliveries. The San Francisco-based company isn’t clearly disclosing service fees, which add as much as 15% to an order and must be paid for customers to receive their groceries, the FTC said.
Instacart has also failed to clearly disclose that customers who enroll in a free trial for its Instacart+ program will be charged membership fees at the end of the trial. The FTC said hundreds of thousands of customers have been charged but have received no benefits from memberships or refunds. Instacart+ offers members free deliveries on most orders for $99 per year.
The FTC said Instacart also advertises a “100% satisfaction guarantee,” but customers who experience late deliveries or unprofessional service are typically only offered a small credit that can be used toward a future order and not a refund.
“The FTC is focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms,” said Christopher Mufarrige, the director of the FTC’s Bureau of Consumer Protection.
Instacart denied the FTC’s allegations of wrongdoing Thursday but said it reached a settlement in order to move forward and focus on its business.
“Instacart is proud to offer a transparent, affordable and consumer-friendly service. We provide 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,” the company said in a statement.
Instacart shares fell nearly 2% in after-hours trading Thursday.
The settlement comes as Instacart is facing separate questions about its pricing practices.
Earlier this month, a report by Consumer Reports and two progressive advocacy groups — Groundwork Collaborative and More Perfect Union — found that Instacart charged different prices for the same grocery items even though online shoppers were filling their Instacart baskets at the same time and at the same stores.
The report suggested that Instacart may be using artificial intelligence tools to drive up costs for consumers.
The FTC said Thursday that it wouldn’t comment on whether it will open a separate investigation into Instacart’s pricing policies, following longstanding policy.
“But, like so many Americans, we are disturbed by what we have read in the press about Instacart’s alleged pricing policies,” FTC spokesperson Joe Simonson said in a statement.
Instacart said Thursday that the FTC requested information on its pricing tools and the pricing practice of the retailers it works with as part of the investigation that led to the settlement. It noted that the settlement didn’t contain any allegations about its pricing practices.
In its own blog post Thursday, Instacart stressed that it isn’t a retailer and doesn’t control base prices listed on its website. It said retailers often test prices in order to see how sensitive consumers are when prices go up or down, and that’s what was happening in Consumer Reports’ case.
Instacart also said the company and its retailers don’t use information about shoppers’ income, zip code or shopping history to set prices.
Instacart said it encourages retailers to charge the same amount on its website as they charge for in-store shoppers. Some retailers, including Lowe’s, Ulta Beauty and Best Buy, already do that, Instacart said, but many others don’t.
This story clarifies an earlier version, which suggested the FTC opened a new investigation to examine Instacart’s pricing practices. They were examined as part of the current investigation.
—Dee-Ann Durbin, AP Business Writer