Instacart will pay customers $60 million in settlement over ‘false advertising’

Instacart denied allegations of wrongdoing but said it reached a settlement in order to move forward and focus on its business

The Instacart logo is displayed on a computer monitor on August 28, 2023 in San Anselmo, California (Justin Sullivan/Getty Images))

Instacart will pay $60 million in customer refunds under a settlement reached with the Federal Trade Commission.

The delivery company has been falsely advertising free deliveries and isn’t clearly disclosing service fees, which add as much as 15% to an order, according to the FTC.

Instacart was also accused of failing 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.

Hundreds of thousands of customers have been charged but have received no benefits from memberships or refunds, according to the FTC. 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 settlement comes as Instacart is facing a separate probe by the FTC into its pricing practices (AP Photo/Richard Drew, File)

“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.

The settlement comes as Instacart is facing a separate probe by the FTC into 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. Instacart confirmed Thursday that the FTC has requested information on its pricing tools and the pricing practice of the retailers it works with.

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.