Refunds coming soon

The grocery app will also stop hiding refund options and obscuring delivery costs.

Instacart has agreed to pay out $60 million in subscriber refunds, the Federal Trade Commission announced on Thursday.

The refunds will help settle a lawsuit the FTC raised, accusing the grocery delivery app of engaging in “numerous unlawful tactics that harmed shoppers and raised the cost of grocery shopping for Americans.”

Under the settlement—which expires after 10 years—Instacart agreed to stop marketing its app with allegedly deceptive claims. That includes supposedly offering “free delivery,” when customers actually paid up to 15 percent in “service fees” not charged for pickup orders. Those service fees, the FTC alleged, were “just delivery fees by another name.”

Additionally, Instacart must cease claims that its services are “100 percent satisfaction guaranteed.” That claim implies that the company offers full refunds, but the FTC alleged that many customers were only offered “a small credit” for late deliveries or unprofessional services. Instacart also allegedly 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 can receive only a credit toward a future order rather than a refund,” the FTC alleged in its complaint.

Instacart “pocketed tens of millions of dollars by failing to honor its promise of 100 percent consumer satisfaction,” the FTC alleged.

Refunds won’t be offered to customers allegedly harmed by those claims, but subscribers who were never told upfront that they’d be automatically charged after free trials will soon be repaid. The settlement stipulated that Instacart would transfer funds to the FTC within 14 days of the court’s approval of the deal.

In a blog post, Instacart emphasized that it has admitted no wrongdoing and elected to settle to “move forward.”

The app defended its “$0 delivery fees” claim by reminding customers that “we clearly and consistently distinguish delivery fees from service fees, which are always shown as a separate, itemized line.” Instacart also noted that subscribers receiving refunds were sent email reminders before renewals were charged. Further, any subscriber shocked by the charges had five days to request an automatic full refund if services were never used, the company said.

Boasting that Instacart has helped users save more than $3 billion “through deals, discounts, and loyalty programs,” the company estimated that users weren’t harmed by its practices and, on average, save $5 for each order.

“We flatly deny any allegations of wrongdoing by the agency, and we believe the foundation of the FTC’s inquiry was fundamentally flawed,” the company said.

The FTC, however, alleged that “hundreds of thousands of consumers have been charged membership fees without receiving benefits from the membership or getting refunds.”

Defending Instacart users from an alleged “variety of deceptive tactics,” the FTC will now work with Instacart to retrieve customer information and issue refunds, a jointly filed order detailing the settlement said.

In its blog, Instacart repeatedly claimed to be transparent and clear with customers about charges. But in a sign that the settlement is already forcing changes, a claim that the company provides “one of the most transparent, customer-friendly subscription programs available, unlocking $0 delivery fees on grocery orders of $10 or more” was starred. At the bottom of the blog, the company clarified that “service and other fees apply.”

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.