D.C. Attorney General Karl Racine announced today that the city has reached a settlement of $2.54 million with Instacart. It will require the San Francisco-based online delivery company to pay the city $1.8 million to resolve claims of charging deceptive fees and roughly $739,000 for failing to pay taxes.

In 2020, Racine filed a lawsuit in D.C. Superior Court that alleged Instacart misled customers into believing the service fees charged to their bills were tips for delivery workers; these funds actually went to the company.

It also said Instacart “owe[d] the District hundreds of thousands of dollars, plus penalty and interest, for unpaid sales taxes since 2014.” 

Nearly $2 million of the settlement Instacart has been ordered to pay will be used to “resolve consumer protection claims around its deceptive service fee practices,” provide restitution to workers and consumers affected by said practices, and to cover any costs connected to the lawsuit, according to court filings.

Instacart will also be required to release $739,057 to D.C. in unpaid taxes and fines, after previously claiming its business model exempted it from city’s tax laws.

Finally, going forward, Instacart must agree to no longer display fees or tips on the platform in a way that may obscure the purposes of those fees.

In a press release, Racine said “D.C. consumers expect their tips to go to workers—not the c-suite,” adding,  “Today’s settlement with Instacart sends a clear message: any company that attempts to dodge their obligations to workers and consumers will be held accountable.”

Instacart continues to deny that it employed any deceptive charging practices.

“While we strongly deny the District’s allegations, we are pleased to put this matter behind us,” the company wrote in a statement to DCist/WAMU. “We believe our communications with customers are highly transparent and we have industry-leading tip protections in place for our shopper community.”