In a blogpost, Instacart rejected claims of any wrongdoing, claiming that the foundation of the FTC’s inquiry was ‘fundamentally flawed’.
Grocery delivery platform Instacart has agreed to pay $60m in customer refunds to settle allegations made by the US Federal Trade Commission (FTC) that the company misled customers with false advertising and “unlawful” subscription enrolment processes.
The FTC alleged that Instacart engaged in a variety of deceptive tactics that misled customers and resulted in more fees, while “depriving customers of refunds”.
As well as the paid settlement, which was announced yesterday (18 December), Instacart will be required to cease its deceptive practices under a proposed FTC order.
Among the FTC’s specific allegations was a claim that the company falsely advertised free delivery for first-time orders, arguing that the presence of a mandatory service fee negated the ‘free delivery’ aspect of the order.
The FTC added that these service fees add as much as 15pc to the order and claimed that these fees were not clearly disclosed to customers.
The antitrust watchdog also alleged that Instacart falsely advertised a “100pc satisfaction guarantee”.
The FTC said the guarantee implies the provision of a full refund if customers are not fully satisfied and that Instacart customers that experience late deliveries or “unprofessional service” typically are not offered full refunds and instead are only given a small credit that can be used toward a future order.
The agency also claimed that the company hid the refund option from the platform’s self-service menu that consumers use to report problems with their orders.
The FTC’s final allegation stated that Instacart failed to clearly disclose terms relating to enrollment to its membership programme, Instacart+, stating that the company did not disclose that customers would be charged for membership at the end of a free trial of the service.
According to the FTC, Instacart charged a number of customers for paid memberships without their “express informed consent”.
“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 programme,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection.
“The FTC is focused on monitoring online delivery services to ensure that competitors are transparently competing on price and delivery terms.”
In a blogpost on Instacart’s website, the delivery provider confirmed the settlement but rejected the FTC’s claims of deception.
“We flatly deny any allegations of wrongdoing by the agency, and we believe the foundation of the FTC’s inquiry was fundamentally flawed,” said the company.
“This settlement allows us to move forward and remain focused on what’s most important to our company: delivering value for our customers, shoppers, and retail and brand partners in the communities we serve.”
Sights set on Eversight?
According to reports, the FTC may not yet be finished with Instacart.
Reuters reported on Wednesday (17 December) that the agency is also investigating the company over its AI-driven pricing tool.
Sources familiar with the matter reportedly told the publication that FTC has requested information on Instacart’s Eversight software, which allows retailers on Instacart to experiment with different prices using AI.
The tool has seen criticism recently after a study by Consumer Reports found that the software was inflating the cost of certain products – with consumers paying as much as 23pc more than other shoppers for the exact same product.
In Instacart’s blogpost concerning yesterday’s settlement, the company added that it was not aware of any other pending FTC investigations.
Earlier this year, Instacart CEO Fidji Simo left the company to join OpenAI as CEO of applications. Instacart has since appointed Chris Rogers as CEO.
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