Maplebear, Inc doing business as Instcart, a grocery delivery service company, is facing a lawsuit for allegedly deceiving consumers through its optional service fees.
On Thursday, District of Columbia (D.C.) Attorney General Karl Racine announced that he sued Instacart for charging consumers millions of dollars by deceiving them into thinking that its optional service fees were tips for its delivery workers.
According to the Attorney General, Instacart did not use the optional service fees to increase the wages of its delivery workers. Instead, the company treated the fees as an extra source of revenue.
Instacart allegedly violated D.C.’s consumer protection and tax laws
The company started operating in D.C. since around 2014. Consumers place grocery orders through Instacart’s app or website. Freelance delivery workers also are known as “gig economy” workers select and deliver the groceries to consumers.
From September 2016 to April 2018, Instacart charged D.C. consumers a default 10% service fee for its delivery services. Consumers thought the service fee was a tip because they have the option to decrease, increase, or waive it. There was no tip option at the checkout.
Instacart changed its practice related to the service fee on April 23, 2018, when the Office of the Attorney General (OAG) contacted it about the issue, which also reported by the media. The company refused to refund consumers who were deceived by its practice.
Attorney General Racine alleged the company violated the District’s Consumer Procedure Act by engaging in deceitful business practice.
In addition, Attorney General Racine accused Instacart of violating the District’s tax law by failing to pay hundreds of thousands of dollars in sales tax.
“Instacart tricked District consumers into believing they were tipping grocery delivery workers when, in fact, the company was charging them extra fees and pocketing the money,” said Attorney General Racine.
He added, “Instacart used these deceptive fees to cover its operating costs while simultaneously failing to pay D.C. sales taxes. We filed suit to force Instacart to honor its legal obligations, pay D.C. the taxes it owes, and return millions of dollars to District consumers the company deceived.”
Attorney General Racine wants Instacart to pay penalties & refunds to consumers
Attorney General Racine is requesting the Superior Court of the District of Columbia to order Instacart to provide restitution to D.C. consumers and to pay unpaid sales taxes plus interests.
He is also asking the Court to order the company to pay civil penalties for violating the District’s consumer protection law and tax law and to pay the costs of the investigation.
Furthermore, the Attorney General is seeking Court order to stop Instacart from future violations of the District’s laws.
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