Instacart ordered to refund $60 million to customers in FTC settlement over hidden fees and subscription traps

Instacart will pay $60 million in refunds to settle the Federal Trade Commission's allegations that it deceived customers with false advertising and shady tactics in its subscription sign-up process. A recent FTC lawsuit accused the grocery delivery company of charging hidden fees and refusing to issue refunds. Instacart lured first-time shoppers with the promise of "free delivery services" that amounted to a free trial of its paid subscription service, the lawsuit claims.

"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 this week.

For example, the FTC said Instacart advertised "free delivery" to customers on their first order, only to surprise them with a mandatory service fee to get their groceries delivered. These fees can add as much as 15% to the order cost, a condition that wasn't properly disclosed to customers, the agency said.

Instacart also advertised a “100% satisfaction guarantee,” implying that anyone who had a problem with their order was entitled to a full refund. In practice, however, the company didn't make this easy, apparently:

"Instacart hid the refund option from the 'self-service' menu that consumers use to report problems with their orders, leading many consumers to erroneously believe they could receive only a credit toward a future order rather than a refund," said Mufarrige.

In a blog post, Instacart acknowledged the FTC settlement but denied "any allegations of wrongdoing by the agency," calling the FTC's lawsuit "fundamentally flawed." The company maintained it uses "straightforward marketing, transparent pricing and fees, clear terms, easy cancellation and generous refund policies" that are all above board.

The settlement comes as Instacart reportedly faces another FTC probe over its AI-driven pricing tool, per Reuters. A widely reported study from progressive advocacy group Groundwork Collaborative, Consumer Reports, and news organization More Perfect Union found that shoppers in four cities paid wildly different prices for identical products from the same store. Instacart's AI-powered Eversight lets some retailers run randomized online pricing tests to gauge shoppers' reactions to fluctuations in cost. Almost 75% of the items tested at popular grocery chains, including Target, Costco, and Kroger, were offered at different prices to shoppers, with one egregious example of a carton of eggs being listed at five different price points at a Safeway in Washington, D.C.

How to receive your Instacart settlement refund

As part of the settlement, Instacart will issue refunds to customers who were charged for Instacart Plus without their informed consent. It’s still unclear how those refunds will go out or when Instacart users can expect them. The agreement also requires Instacart to stop the deceptive practices outlined in the lawsuit, according to a news release.

If it goes anything like the recent $1.5 billion Amazon Prime settlement, you can likely expect the latest updates about eligibility requirements and a payment timeline to hit whatever inbox you have associated with your Instacart account. In Amazon's case, the company promised to automatically issue some customers refunds within 90 days of the settlement. Others were sent claim forms via email to complete and submit within 180 days, with refunds arriving 30 days after approval. We should hear more about Instacart's timeline in the coming months.

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