Instacart Settles FTC Lawsuit Alleging Deceptive Advertising and Subscription Enrollments

Instacart agreed to pay $60 million to settle a Federal Trade Commission lawsuit that alleged the company engaged in deceptive tactics.

In its lawsuit, the regulator alleged that the grocery delivery platform falsely advertised “free delivery” to consumers on their first order even though it required them to pay a “service fee” for the delivery, falsely advertised a “100% satisfaction guarantee” even though it typically did not offer full refunds, and failed to clearly disclose terms related to enrollment in its Instacart+ membership program, the FTC said in a Thursday (Dec. 18) press release.

“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 the release.

Instacart said in a Thursday blog post that it denies the FTC’s allegations of wrongdoing and believes the foundation of the regulator’s inquiry was “fundamentally flawed.”

“We stand firmly behind the integrity, transparency and value of our programs,” the company said in its post. “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.”

Instagram said in the post that it clearly displays all fees before checkout; clearly distinguishes between delivery fees and service fees; clearly discloses the Instacart+ terms before signup, during the free trial and throughout the membership period; and makes it “incredibly quick and easy” to cancel an Instacart+ membership.

The proposed settlement order requires the company to pay $60 million in refunds to consumers, prohibits the company from making misrepresentations about costs and satisfaction guarantees, and requires it to clearly disclose terms and obtain expressed informed consent for transactions involving subscription models, according to the FTC’s press release.

The order must be approved and signed by a district court judge before taking effect, per the release.

The news came a day after it was reported that the FTC is investigating Instacart’s artificial intelligence pricing tool, Eversight, after a study found that different shoppers got different prices for the same products on the Instacart platform.

The news also came two days after 21 states and the District of Columbia joined an FTC lawsuit against Uber that alleges that the rideshare and delivery company engaged in deceptive billing and cancellation practices related to its Uber One subscription.