Instacart has agreed to pay $60 million in customer refunds after a settlement with the Federal Trade Commission (FTC) that cited deceptive advertising and hidden fees.
Settlement Details
The FTC announced Thursday that Instacart will refund customers for services that were not clearly disclosed. The settlement requires the company to reimburse up to $60 million to affected shoppers. The refunds are intended to correct misleading claims about free deliveries and other billing practices.
Alleged Deceptive Practices
The agency’s complaint centers on several claims. First, Instacart has advertised “free deliveries” without revealing that service fees can add as much as 15 % to an order. Second, customers who sign up for a free trial of the Instacart+ subscription are automatically charged the annual fee of $99 once the trial ends, yet many users report receiving no membership benefits or refunds. Finally, the company promotes a “100 % satisfaction guarantee,” but when deliveries are late or staff act unprofessionally, shoppers are typically offered only a small credit for a future order rather than a full refund.
FTC Oversight and Comments
Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said the agency is “focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms.” The FTC also stated it would not comment on whether a separate investigation into Instacart’s pricing policies will be launched, following longstanding policy. In a statement, spokesperson Joe Simonson noted that the agency was “disturbed by what we have read in the press about Instacart’s alleged pricing policies.”
Instacart’s Response
Instacart denied the FTC’s allegations of wrongdoing but said it reached the settlement to move forward and concentrate on its business. In a press release, the company asserted, “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.”
Market Reaction
Following the announcement, Instacart’s shares fell nearly 2 % in after-hours trading on Thursday. The drop reflects investor concern over the financial impact of the settlement and the broader scrutiny of the company’s practices.
Separate Pricing Investigation
The settlement arrived amid separate questions about Instacart’s pricing. Earlier this month, a report by Consumer Reports, Groundwork Collaborative, and More Perfect Union found that Instacart charged different prices for identical grocery items even when shoppers were filling baskets at the same time and at the same stores. The report suggested that the company might be using artificial-intelligence tools to increase consumer costs.
Consumer Reports Findings
The Consumer Reports study highlighted that retailers sometimes test prices to gauge consumer sensitivity. Instacart’s blog post on Thursday clarified that the company does not control the base prices listed on its website. It stated that retailers often adjust prices in response to market conditions, a practice that was occurring in the Consumer Reports case.
Instacart’s Clarifications
In its own blog post, Instacart emphasized that it is not a retailer and does not set the prices that appear on its platform. The company explained that it does not use shoppers’ income, zip code, or shopping history to set prices. Instacart also encouraged retailers to charge the same amount online as they do in-store. While some retailers, such as Lowe’s, Ulta Beauty, and Best Buy, already follow this practice, many others do not.
Key Takeaways
- Instacart will refund $60 million to customers following an FTC settlement over deceptive delivery ads and hidden fees.
- The company’s Instacart+ trial program has been criticized for charging customers after the trial without delivering benefits.
- A separate investigation into Instacart’s pricing practices is under consideration, with Consumer Reports raising concerns about price variation.
Instacart’s settlement underscores the growing regulatory focus on transparency in the online grocery delivery market. While the company maintains it operates within the law, the financial and reputational repercussions of the FTC’s findings may prompt further scrutiny and reforms in the industry.
