It’s been just over a month since federal regulators asked for public feedback about the fairness and transparency of ordering groceries online.
And boy, did they get feedback.
The Federal Trade Commission is sifting through some 250 comments submitted in response to its call for input about the true costs of buying groceries online. It’s part of the agency’s plan to consider whether to impose stricter regulations to help shoppers understand exactly how much they’re paying and why.
“Consumers are not always made aware that prices are marked up or that they would need to parse through disclosures to understand the various ways in which prices may vary,” the FTC explained. So it asked for real-world examples of “unfair or deceptive acts or practices” that it might need to address.
And everyday shoppers, activists, trade groups and some delivery services themselves are among the hundreds who answered the call.
Most shoppers who responded were, perhaps unsurprisingly, in favor of the FTC’s probe and against having to pay more than they thought was fair when shopping for groceries online.
“I have found that when I order food to be delivered or groceries that my cost is sometimes 50% higher than if I had gone into the store… I refuse to do it anymore,” one commenter wrote. “Food delivery services are highly deceptive, with opaque per-item markups, unclear delivery and service charges, and obscure conventions that determine service quality based on tip offered,” another commented. “It would be good if the services could be compelled to be transparent so it is clear upfront what the final bill will be for the services offered.”
“There should be a set price for delivery and it should be clearly stated up front before the customer starts shopping,” one shopper suggested. “Consumers have a right to know what they will actually be charged for, prior to committing to a purchase,” another offered. “This disclosure requirement would bring online delivery platforms in line with basic standards of pricing transparency that consumers rightly expect.” And another called online delivery services “an exploitive manipulated third party market,” in which “consumers are lured into a black box of pricing with ambiguous fees that drive price inflation.”
Those fees have proven particularly unpopular. “Some delivery platforms charge both ‘delivery’ fees and ‘service’ fees, leading many consumers to wonder what ‘service’ they are paying for besides delivery,” the FTC noted when requesting feedback. And “often, the existence and cost of these fees are not disclosed until checkout, if at all.”
Many shoppers agreed. “I don’t even know what the mysterious service fee is for,” one complained. “They are always adding on extra fees. Sometimes they call it a ‘delivery’ fee, which they charge on top of what they call their ‘convenience’ fee,” another pointed out. “Finding a good advertised price, only to pay more when finally reaching the checkout screen can be annoying and limits the ability of consumers to compare prices,” another shopper added. “I do not think the issue is companies charging fees,” one commenter acknowledged. “I think the issue is consumers knowing exactly what they are agreeing to before they spend their time building an order.”
Another common complaint is the higher prices charged in addition to the various fees. “I am already paying a service fee and a delivery fee. Why is the cost of the food also higher?” one commenter wondered. “The platforms do not provide clear, upfront disclosure that grocery items are being sold at a premium,” another pointed out. “It is a very reasonable ask to have the prices of items on delivery services be the same price as if you went to the location itself… especially when delivery fees and tipping already exists,” another shopper suggested.
The FTC is not considering an outright ban on additional fees or higher online prices. It just wants to know whether online platforms should be required to disclose them more clearly and prominently. But not everyone is in favor of that. Most who expressed opposition, represent the very industry groups that would be most impacted.
“A typical grocery order is composed of dozens of items with prices that shift based on store-level promotions and inventory,” explained TechNet, a network of technology CEOs. “Delivery fees are dynamic, scaling with distance and time to accurately reflect service costs. These fees are not arbitrary markups; they fund the operational costs of a multi-party transaction.” The total price paid for an online grocery order “depends on several variables, including the items ordered, delivery distance, time of day, demand conditions, subscription status, and any available promotions or discounts,” the Chamber of Progress, a tech industry association, added. “Until those details are entered, there is no fixed total for the platform to display.” And the U.S. Chamber of Commerce defended the fees charged, saying they “reflect genuine costs of providing a complex, on-demand service. Treating them as presumptively deceptive or unnecessary would mischaracterize how these markets work.”
As for charging higher prices online for the very same items available for less in store, the Chamber of Progress said that’s up to individual retailers, not the delivery services themselves. “A mandate to police price differentials between in-store and on-app prices would force platforms to take legal responsibility for pricing decisions they do not make, and for in-store price data they often do not have,” the group explained. Besides, “a consumer dissatisfied with a platform’s prices or disclosures can switch within minutes at no cost.” The advocacy group Americans for Tax Reform agreed. “If a customer finds that the fees are unacceptable, he or she can choose not to finalize the order… As long as fees are disclosed before the transaction is finalized and payment is processed, there is no lack of transparency, and no consumer is making a purchase that he or she did not intend to make.”
Others warned of potential unintended consequences. George Mason University’s Mercatus Center, which studies the effects of regulations on society, urged the agency to “distinguish hidden or misleading fees from ordinary discounts and pricing practices. Coupons, loyalty rewards, student discounts, senior discounts, and subscription benefits are all forms of price variation that may benefit price-sensitive consumers.” TechNet agreed, saying “disclosure rules must preserve flexibility for promotions, loyalty programs, and coupons.”
Some groups representing consumers, however, said the industry’s fears are unfounded, and their defense of their pricing practices are unwarranted.
A statement co-signed by the attorneys general of 15 states and Washington, DC said online grocery shoppers “confront a growing laundry list of fees for delivery and in-store pickup orders. Many of these fees are not clearly presented to the consumer until they have spent valuable time selecting items and are ready to check out.” The Center for Science in the Public Interest argued that “requiring customers to navigate apps and websites through multiple clicks to arrive at vague descriptions of pricing policies is inadequate.” And Consumer Reports called online grocery pricing “a pervasive and increasingly complex system of hidden charges, inflated online prices, and misleading subscription programs” which leave shoppers “confused, befuddled, and disappointed by the experience of using the delivery apps and services.”
And what about the actual delivery services? Uber, which delivers food and groceries via Uber Eats, said its platform is already “transparent that when a consumer places a delivery order, the consumer is purchasing platform services in addition to food or grocery items, and that delivery and platform fees support those services.” Its customers “are provided with clear, itemized pricing before completing an order and can make informed decisions based on price, timing, and convenience.”
“Customers understand that when they are purchasing goods via a delivery platform, they will have to pay the platform for the delivery services,” Instacart argued. “Requiring them to be told in the purchase flow that the total cost will vary depending on their basket or delivery choices… does little to benefit customers, as it merely provides them with information that they already have.”
So the FTC will have a lot to consider. It’s given no timeline as to when and whether it will make a decision about whether to impose new regulations about online pricing transparency. To one shopper, though, it’s “a no-brainer and must be passed, implemented, and thoroughly enforced as the public is wising up, watching and will demand the agency uphold its mission to protect consumers.” Another said “these platforms should be ashamed. The fact that the federal government must mandate basic ethical behavior — behavior any honest business should practice voluntarily — is a profound failure of corporate integrity.”
Still others disagree. “Any questions about delivery services are the fault of the consumer, who fail to read or understand any instructions in how the service operates,” one shopper argued. “Leave Instacart alone,” another pleaded. “Don’t you people have other things to do?”
Everyone is keeping a close eye on grocery prices these days. Those who choose to buy groceries online already know that convenience comes at a cost. The question is, whether the government needs to get involved to ensure you know just how costly that convenience can be.
Image source: Uber Eats
