The Federal Trade Commission’s $60 million settlement with Instacart marks one of the most significant enforcement actions to date against the use of artificial intelligence in consumer-facing pricing and marketing systems. The case highlights how traditional consumer protection laws apply even when pricing, promotions, and memberships are influenced or automated by algorithms.

As companies increasingly rely on AI tools to personalize offers, test prices, and drive subscriptions, the Instacart settlement sends a clear message: transparency, consent, and accuracy are legal obligations, not optional features of innovation.

Why the FTC Took Action Against Instacart

The FTC sued Instacart over what it described as a pattern of deceptive practices that led to higher grocery prices and recurring memberships without clear consumer consent. According to the complaint, shoppers were misled by unclear labels, hidden fees, and promotional language that suggested savings or benefits that did not fully reflect what customers ultimately paid.

Central to the case was Instacart’s use of AI-powered pricing experiments that showed different prices to different consumers for the same items, at the same time, in the same stores. Some internal and external research found that quoted prices could vary by as much as 23 percent across users.

These practices raised concerns among regulators and consumer advocates about whether shoppers were being informed that they were part of pricing tests and whether the final costs were being clearly disclosed before checkout.

How Instacart’s AI Pricing Tool Works

Instacart’s pricing system relied on an AI-powered tool known as Eversight. The tool allowed grocers and platforms to run price experiments to test how consumers respond to higher or lower prices across different product categories.

Instacart publicly stated that retailers using the tool could see revenue growth of 1 to 3 percent. While the company claimed the tests were randomized, critics argued that consumers deserved to know when they were being placed into pricing experiments that could affect how much they paid.

Nonprofit consumer advocacy groups later reported that prices in Instacart shopping baskets varied by an average of 7 percent across hundreds of shoppers in multiple cities who tested identical carts at the same stores.

The Deceptive Practices Highlighted in the Complaint

The FTC’s complaint focused on three main areas where it said Instacart misled consumers.

“Free Delivery” Promotions

Instacart advertised “free delivery” for new users on their first three orders, creating the impression that no additional charges would apply. In practice, every delivery order still included service fees or small order add-ons that functioned as delivery-related charges.

These fees were often only visible at the final checkout stage, after consumers had already spent time building their carts. Instacart’s own internal research reportedly found that many users felt this approach resembled a bait-and-switch tactic.

“100% Satisfaction Guarantee” Claims

Instacart promoted a satisfaction guarantee that suggested customers could receive full refunds if they were unhappy with the service. The FTC alleged that many consumers instead received account credits for future orders rather than refunds to their original payment method.

The written terms limited refunds to certain fees rather than the total order cost. In 2022, Instacart also removed an easy-to-find self-service refund option, which shifted more customers toward accepting credits instead of cash refunds.

Free Trials That Converted Into Paid Memberships

Instacart offered free trials for its Instacart+ membership, which provides $0 delivery fees on qualifying orders. Plans included a $99 annual option and a $9.99 monthly option.

The FTC alleged that consumers were not clearly told which plan they would be charged for once the trial ended. Many users discovered they had been enrolled in a full annual membership without explicit consent and were unable to obtain refunds even if they had not used the service after being charged.

What the $60 Million Settlement Requires

Under the proposed settlement order, Instacart agreed to pay $60 million in refunds to consumers who were charged misleading fees or enrolled in memberships without clear consent. The FTC stated that the refund program would reach hundreds of thousands of affected customers.

The order also restricts Instacart’s future business practices in several key ways:

• The company must clearly disclose delivery costs and service fees before checkout.

• It cannot misrepresent refund guarantees or satisfaction claims.

• Customers must explicitly opt in before being enrolled in paid memberships.

In addition, Instacart’s AI-driven pricing tools must be adjusted to ensure that customers see accurate totals and are not misled about the true cost of their orders.

How This Fits Into the White House AI Action Plan

The enforcement action comes against the backdrop of the White House’s AI Action Plan, which emphasizes innovation, competition, and national leadership in artificial intelligence. While the plan supports market-driven AI development, it does not create exemptions from existing consumer protection laws.

Instead, it reinforces the authority of agencies like the FTC to address unfair or deceptive practices, even when those practices are powered by automated or algorithmic systems. The Instacart case demonstrates how long-standing legal standards still apply in digital and AI-enabled markets.

The Broader Debate on AI and Consumer Protection

Consumer advocacy groups argue that the case shows how AI can scale harm when deceptive practices are automated or personalized. They emphasize the need for companies to regularly audit their AI systems for bias, pricing disparities, and misleading outputs.

On the other side, industry and pro-market policy groups warn that aggressive enforcement could slow innovation and reduce the ability of companies to experiment with pricing models and personalized user experiences. Some argue that clear federal guidance would be more effective than enforcement-led regulation.

Legal and policy experts point out that even as national policy leans toward competitiveness and innovation, agencies like the FTC still have broad authority to apply general consumer protection statutes to AI-enabled conduct.

What This Means for Businesses Using AI in Marketing and Pricing

The Instacart settlement reinforces a central principle of AI governance: automation does not remove responsibility. Whether pricing, promotions, or subscriptions are set by humans or algorithms, companies remain accountable for how those systems affect consumers.

For businesses, this means ensuring that AI tools are transparent, that consumers understand what they are agreeing to, and that marketing claims accurately reflect what customers will actually receive. As AI becomes more embedded in everyday commerce, regulatory scrutiny is likely to increase rather than fade.

Conclusion

The FTC’s action against Instacart highlights the unresolved tension between encouraging AI-driven innovation and protecting consumers from deceptive or unfair practices. While dynamic pricing and automated marketing can improve efficiency and personalization, they must operate within the boundaries of transparency, consent, and fairness.

As regulators, companies, and policymakers continue to shape the future of AI governance, the Instacart case stands as a reminder that traditional consumer protection principles still define the rules of the digital marketplace.