Instacart’s month keeps getting worse. The grocery delivery service was hit with another blow on Thursday, when the U.S. Federal Trade Commission (FTC) announced the company agreed to issue $60 million in refunds to settle allegations that it engaged in deceptive business practices.
The news dropped the same day reports surfaced that the FTC is also probing Instacart’s pricing practices, following a report that found the company was charging some customers nearly 25% more for the same products. Instacart claims the price differences stem from experiments run in partnership with a small number of stores, and that prices were randomized rather than determined based on customers’ demographics or personal information.
Now, Instacart is settling separate charges made in an FTC lawsuit filed Thursday in a federal court in San Francisco.
“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,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, in a press release.
The lawsuit alleges that Instacart falsely promoted “free delivery” for a customer’s first order, even though shoppers still had 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,” implying that customers could get full refunds. In reality, shoppers who experienced late deliveries or poor service were often offered only a small credit for future orders. On top of that, Instacart hid the refund option from the app’s “self-service” menu, leaving many people thinking a credit was their only option.
Finally, Instacart was accused of not clearly disclosing that at the end of a free trial for its Instacart+ subscription, customers would automatically start getting charged. As a result, many shoppers were billed without giving consent to be enrolled in the program.
“We flatly 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 emailed statement.
The spokesperson added that Instacart provides “straightforward marketing, transparent pricing and fees, clear terms, easy cancellation, and generous refund policies,” which are in compliance 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 terms and get consumers’ express consent for subscription charges that auto-renew unless shoppers opt out.
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