DC AG sues Instacart, alleging the company pocketed tips after tricking customers

Washington-DC

WASHINGTON (WDVM) — DC Attorney General Karl A. Racine says Instacart charged District consumers millions of dollars in deceptive service fees and didn’t pay hundreds of thousands of dollars in District sales tax.

The Office of the Attorney General says the grocery delivery service didn’t tell its customers optional service fees were added to their bills, making them think the fees were tips for their delivery workers. The AG’s office says those fees were actually going to the company, not directly to workers.

The AG’s office also says Instacart violated District tax law by not collecting hundreds of thousands of dollars in sales tax on delivery and service fees it collected.

“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 AG Racine. “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.”

The lawsuit is trying to get money back for consumers who paid the deceptive fees, and back taxes and interest on taxes owed to the District.

Instacart has been operating in Washington, D.C. since 2014, fulfilling thousands of delivery orders each week, per the AG’s office. The AG’s office says, from September 2016 through April 2018, Instacart charged District consumers a default ten percent “service fee” for delivery services. The AG’s office says most people thought that was a tip, set as a percentage of the order total. The difference: the service fee went to Instacart, not directly to its workers.

The AG’s office says Instacart used the extra revenue to cover its operating expenses.

Instacart changes its practice in April 2018, but the AG’s office says the company still hasn’t refunded customers who were charged the deceptive fees. The lawsuit also says Instacart did not collect District sales tax on the revenue it received from its service and delivery fees the entire time it has done business within the District.

Click here for a copy of the lawsuit.

If you think you have been a victim of unfair of deceptive business practices, you can file a complaint with the Office of the Attorney General by calling (202) 442, 9828, emailing  consumer.protection@dc.gov, or filling out a consumer complaint form online.

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