Instacart settles DC lawsuit over misleading fees for $2.5 million

Instacart has settled a two-year-old lawsuit filed by the D.C. Office of the Attorney General for $2.54 million over what it alleged was misleading service fees and failure to pay sales taxes.

The D.C. Office of the Attorney General filed the lawsuit in 2020, alleging that from 2016 to 2018, Instacart falsely led consumers to believe that service fees charged on orders were tips for delivery workers. But instead of going to delivery workers, Instacart collected those fees.

The service fee had replaced an Instacart checkout screen option for a tip, which defaulted to 10% and was adjustable. The service had the same option.

“D.C. consumers expect their tips to go to workers, not the C-suite. Any business operating in the District must provide consumers with truthful information, pay workers the wages and tips they have earned and pay the sales taxes that they owe,” said Attorney General Karl Racine.

Instacart will pay $1.8 million to the District for restitution to delivery workers and consumers as well as to cover legal expenses. The company will also pay $739,000 in previously disputed sales taxes on those service fees and on delivery fees it collected between 2014 and 2020. Instacart had made those payments previously under protest in 2020.

Instacart changed the service fee practice in 2018.

As part of the settlement, Instacart also agreed to no longer display fees or tips in a misleading manner.

While agreeing to settle the suit, Instacart denies the claims, including violations of consumer protection laws or D.C. sales tax laws.

Racine said the suit was part of the office’s efforts to hold Big Tech accountable for deceptive practices.

“Today’s settlement with Instacart sends a clear message: Any company that attempts to dodge their obligations to workers and consumers will be held accountable,” Racine said.

Racine has filed a lawsuit against Facebook for handing over users data to Cambridge Analytica during the runup to the 2016 presidential election and an antitrust lawsuit against Amazon for anticompetitive price control practices. He’s also sued Google for what he calls manipulative practices intended to access consumers’ locations.

A copy of the consent order is available online.

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Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

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