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Instacart will pay $60 million to settle allegations by the Federal Trade Commission that it misled users with false advertising and deployed “unlawful subscription enrollment” practices.
The federal agency alleged that Instacart used deceptive tactics in its subscription sign-up and “satisfaction guarantee” advertising that caused consumers to pay more in fees, and prevented them from securing refunds.
For example, the FTC said Instacart falsely dangled promises of “free delivery” to consumers on their first order, while shoppers were still required to pay a mandatory service fee to get their groceries delivered.
The FTC also said that Instacart falsely advertised full refunds for users who had problems with their order.
“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.
In a blog post, Instacart acknowledged the FTC settlement but denied “any allegations of wrongdoing by the agency.”
The grocery delivery platform said it uses “straightforward marketing, transparent pricing and fees, clear terms, easy cancellation and generous refund policies” that comply with the law.
“This settlement allows us to move forward and remain focused on what’s important to our company: delivering value for customers, shoppers and retail and brand partners in the communities we serve,” an Instacart spokesperson said.
The move comes as Instacart reportedly faces a separate probe by the FTC into its pricing practices.
The probe was launched after a wide-ranging study was released last week showing that its algorithmic pricing tools caused shoppers to pay different prices for identical items from the same store.
News of the FTC probe sent Instacart shares lower by about 7% in extended trading on Wednesday. The stock closed down more than 1% on Thursday.
The FTC has recently ramped its scrutiny of companies alleged to be using deceptive billing and enrollment schemes.
It sued Uber in April, claiming the ride-hail provider charged users for Uber One subscriptions without their consent. On Monday, 21 states joined the agency’s lawsuit as part of an amended complaint.
In September, the agency sued Live Nation and Ticketmaster for allegedly using bait-and-switch pricing tactics and illegally coordinating with ticket brokers.
Earlier this month, the FTC said it was sending more than $27.6 million to consumers who were unknowingly enrolled in and charged for plans that shipped them products marketed to promote weight loss, clear skin and other health-care benefits.
