Earlier this week, I wrote about Instacart using an AI-enabled experiment that can charge customers up to 23 percent more for the same item ordered from the same store at the same time.
Now, Instacart is in trouble with the Federal Trade Commission.
Instacart will pay $60 million in refunds to consumers to settle allegations that the company engaged in unlawful tactics that harmed shoppers and raised the cost of groceries for Americans. Instacart will be required to stop its deceptive practices under a proposed FTC order, and consumers who were charged for Instacart+ without their permission will receive refunds as a result of the settlement.
“Instacart misled consumers by advertising free delivery services – and then charging consumers to have groceries delivered – and failing to disclose to consumers that signed up for a free trial that they would be automatically enrolled into its subscription program,” Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, said in a statement.
The FTC has alleged Instacart engaged in a variety of deceptive tactics:
- Falsely advertised “free delivery” to consumers on their first order.
- Instacart’s claims of “free delivery” are false because consumers still must pay a mandatory “service fee” to get their groceries delivered.
- These mandatory service fees add as much as 15 percent to the order cost and weren’t clearly disclosed to consumers.
- Falsely advertised a “100% satisfaction guarantee,” implying that it will provide full refunds when consumers are not fully satisfied.
- Consumers who experience late deliveries or unprofessional service typically aren’t offered full refunds and instead are given only a small credit that can be used toward a future order.
- Instacart hid the refund option from the “self-service” menu that consumers use to report problems with their orders, leading many consumers to believe they could receive only a credit toward a future order rather than a refund.
- Failed to clearly disclose terms relating to Instacart+ membership enrollment.
- Instacart’s free-trial enrollment process for Instacart+ didn’t adequately disclose that consumers would be charged for memberships at the end of their trials, nor did it disclose Instacart’s restrictive refund policy.
- As a result, Instacart has charged many consumers for paid memberships without their consent. Hundreds of thousands of consumers have been charged membership fees without receiving benefits from the membership or getting refunds.
FTC final orders have the force of law when approved and signed by the District Court judge.
