TOPLINE
DC Attorney General Karl Racine sued Instacart Shopping Supply Company on Thursday for tricking customers into thinking a service was a tip, and then pocketing money for their own business expenses, as well as hundreds of thousands dollars to pay sales tax to the city.
Clark Jen Valencia resident shop for a customer as she supplements her income at Instacart … [+]
KEY FACTS
The lawsuit alleges that Instacart changed its cash policy in 2016, replacing a replacement tip option with a “service” charge.
Between September 2016 and at least April 2018, the lawsuit states that reasonable customers may have thought the service charge was a tip, “but unlike a tip, the service charge went to Instacart and did not change the salaries or commissions paid by the company’s retailers. . ”
The lawsuit said Instacart never disclosed to the consumer on the main check-out screen that service was “fully optional, bank on the prospect that many consumers did not discover that the service charge could be waived or the purpose of that charge would continue and a tip.” ”
Instacart also does not collect any local sales tax on the revenue it received from its service and delivery costs, the lawsuit alleges.
The lawsuit calls for Instacart to refund taxes and provide restitution to customers who have been abused.
In a statement, Instacart said “the allegations made in this complaint are unreasonable” and that it discloses to customers that “tips are always separate from and in addition to all service charges, and we clearly state that service charges go to our operations.”
Crucial quote
“Instacart deceives the district’s consumers into believing they were tipping workers for grocery suppliers when the company actually charged them extra fees and pocketed the money,” Racine said in a statement. “Instacart used these fraudulent fees to cover its operating costs while not paying any DC taxes.”
Important background
Gig companies have received years of criticism for their tipping policies. Instacart, Amazon Flex and Doordash came under fire last year for using tips to subsidize the basic payment of drivers. All three times eventually headed back to public writing. Uber continued its calls for years to include a tip option, and introduced the feature only in 2017 after former CEO Travis Kalanick resigned.
Continue reading
Read the full lawsuit here.
