Filed
`
`D.C. Superior Court
`10/16/2020 18:54PM
`Clerk of the Court
`
`SUPERIOR COURT FOR THE DISTRICT OF COLUMBIA
`
`CIVIL DIVISION
`
`Case No. 2020 CA 003777 B
`
`Judge Yvonne M. Williams
`
`Next Court Date: December 11, 2020
`Event: Initial Scheduling Conference
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`DISTRICT OF COLUMBIA
`
`Plaintiff,
`
`V.
`
`MAPLEBEAR INC. DBA
`INSTACART,
`
`Defendant.
`
`DEFENDANT MAPLEBEAR INC. DBA INSTACART’S
`
`CONTESTED MOTION TO DISMISS COUNT I OF PLAINTIFF’S COMPLAINT
`
`Pursuant to Rule 12(b)(6) of the Superior Court Rules of Civil Procedure, Defendant
`
`Maplebear Inc. dba Instacart (“Instacart”) hereby moves to dismiss Count I of Plaintiff District of
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`Columbia’s Complaint with prejudice. This motion is supported by the accompanying Points and
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`Authorities, which is incorporated by reference.
`
`Dated: October 16, 2020
`
`Respectfully Submitted,
`
`ORAL HEARING REQUESTED
`
`/s/ Jonathan A. Direnfeld
`
`William F. Stute (D.C. Bar No. 1032093)
`Jonathan A. Direnfeld (D.C. Bar No. 989432)
`Sydney Hargrove (D.C. Bar No. 1613706)
`ORRICK, HERRINGTON & SUTCLIFFE LLP
`Columbia Center
`
`1152 15th Street, NW.
`Washington, DC 20005-1706
`Telephone: (202) 339-8400
`j direnfeld@orrick.com
`
`Counsel for Defendant Maplebear Inc. dba
`Instacart
`
`

`

`SUPERIOR COURT FOR THE DISTRICT OF COLUMBIA
`
`CIVIL DIVISION
`
`DISTRICT OF COLUMBIA
`
`Plaintiff,
`
`V.
`
`MAPLEBEAR INC. DBA
`
`INSTACART,
`
`Defendant.
`
`VVVVVVVVVVVV
`
`Case No. 2020 CA 003777 B
`
`Judge Yvonne M. Williams
`
`Next Court Date: December 11, 2020
`
`Event: Initial Scheduling Conference
`
`MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT
`
`MAPLEBEAR INC. DBA INSTACART’S CONTESTED MOTION TO
`
`DISMISS COUNT I OF PLAINTIFF’S COMPLAINT
`
`

`

`TABLE OF CONTENTS
`
`Page
`
`I.
`
`II.
`
`III.
`
`IV.
`
`INTRODUCTION ............................................................................................................. 1
`
`FACTUAL BACKGROUND ............................................................................................ 2
`
`LEGAL STANDARD ........................................................................................................ 5
`
`ARGUMENT ..................................................................................................................... 6
`
`A.
`
`OAG Fails to State a Claim that Instacart “Is” or “Intends to Violate” the
`
`CPPA ...................................................................................................................... 6
`
`B.
`
`OAG Fails to State a Plausible Claim that Instacart Previously Violated
`the CPPA ................................................................................................................ 9
`
`l.
`2.
`
`3.
`4.
`
`Instacart Clearly Disclosed that the Service Fee Was Waivable ............... 9
`Instacart Clearly Disclosed to Consumers that the Service Fee Was
`Not a Tip .................................................................................................. ll
`Instacart Used the Service Fee for its Stated Purpose .............................. l3
`The Alleged “Free Delivery” Promotions did not Deceive
`Consumers into Paying the Service Fee ................................................... 14
`
`V.
`
`CONCLUSION ................................................................................................................ l4
`
`

`

`TABLE OF AUTHORITIES
`
`Page(s)
`
`Cases
`
`Flocco v. State Farm Mut. Auto. Ins. Co.,
`
`752 A.2d 147 (DC. 2000) ....................................................................................................... 14
`
`FTC v. Shire VivoPharma, Inc.,
`
`917 F.3d 147 (3d Cir. 2019) ........................................................................................... 1, 7, 8, 9
`
`Logan v. LaSalle Bank Nat. Ass ’n,
`80 A.3d 1014 (DC. 2013) ......................................................................................................... 6
`
`Murphy v. Millennium Radio Grp. LLC,
`650 F.3d 295 (3d Cir. 2011) ....................................................................................................... 7
`
`Pearson v. Soo Chung,
`961 A.2d 1067, 1075 (DC. 2008) ............................................................................................. 6
`
`Potomac Dev. Corp. v. District of Columbia,
`28 A.3d 531 (DC. 2011) ........................................................................................................... 5
`
`Providence Hosp. v. D. C. Dep ’t ofEmployment Servs.,
`855 A.2d 1108 (DC. 2004) ....................................................................................................... 7
`
`Saucier v. Countrywide Home Loans,
`64 A.3d 428 (DC. 2013) ......................................................................................................... 14
`
`Tingling—Clemons v. District of Columbia,
`133 A.3d 241 (DC. 2016) ................................................................................................... 5, 14
`
`Touche Ross & Co. v. Redington,
`442 US. 560 (1979) ................................................................................................................... 8
`
`Washkoviak v. Student Loan Mktg. Ass ’n,
`849 A.2d 37 (DC. 2004) ....................................................................................................... 3, 9
`
`Wetzel v. Cap. City Real Estate, LLC,
`73 A.3d 1000 (DC. 2013) ..................................................................................................... 5, 6
`
`Whiting v. AARP,
`637 F.3d 355, 364 (DC. Cir. 2011) ........................................................................................... 6
`
`Statutes
`
`Consumer Protection Procedures Act (“CPPA”) ................................................................... passim
`
`_ii_
`
`

`

`DC. Code § 28-3901(d) ............................................................................................................. 8, 11
`
`DC. Code § 28-3904 ....................................................................................................................... 5
`
`DC. Code § 28-3905 ................................................................................................................... 7, 9
`
`DC. Code § 28-3905(g)(2) .............................................................................................................. 6
`
`DC. Code § 28-3909 ................................................................................................................... 1,6
`
`DC. Code § 28-3909(a) ....................................................................................................... 6, 7, 8, 9
`
`FTC Act § 13(b) ........................................................................................................................... 8, 9
`
`Other Authorities
`
`Fed. R. CiV P. § 8(a) ........................................................................................................................ 5
`
`Federal Trade Commission, .com Disclosures: How to Make Efi’ective Disclosures
`in Digital Advertising (March 2013),
`https://www.ftc.gov/sites/default/files/attachments/press-releases/fic-staff—
`revises-online-advertising-disclosure-
`guidelines/1303 lZdotcomdisclosurespdf................................................................................ l 1
`
`Will Kenton, Service Charge (Aug. 10, 2020),
`https://www.investopedia.com/terms/s/service-charge.asp ..................................................... 12
`
`-iii-
`
`

`

`I.
`
`INTRODUCTION
`
`More than two years after Maplebear Inc. dba Instacart (“Instacart”) discontinued a
`
`waivable service fee in connection with its on-demand grocery delivery platform, the District of
`
`Columbia’s Office of the Attorney General (“OAG”), brings this action alleging a violation of the
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`Consumer Protection Procedures Act (“CPPA”). OAG does not cite to a single complaint from
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`any D.C. consumers regarding this service fee. Instead, during the heart of the COVlD-19
`
`pandemic when D.C. full-service shoppers (who deliver goods to homes) and consumers (who
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`receive goods at their homes) are relying respectively on each other for financial and grocery
`
`delivery services support, OAG seeks to punish Instacart for a waivable, historical fee that it
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`clearly disclosed and never misrepresented to any consumer. Count I of the Complaint should be
`
`dismissed for at least two independent reasons.
`
`First, OAG has not pled the foundational facts necessary to bring a claim in this Court
`
`under DC. Code § 28-3909 for a CPPA violation. The DC. Code grants OAG the ability to file
`
`an action for injunctive relief and restitution in Superior Court only in circumstances where a
`
`defendant “is using” or “intends to use” an act or practice in violation of the CPPA. No such
`
`allegation is made in the Complaint. To the contrary, OAG concedes that Instacart voluntarily
`
`ceased the alleged practice in April 2018. The DC. Code does not authorize a court action in these
`
`circumstances—just like the similarly unambiguous statute at issue in FTC v. Shire VivoPharma,
`
`Inc., 917 F.3d 147 (3d Cir. 2019), did not permit the Federal Trade Commission (“FTC”) to bring
`
`an action in court (as distinct from an administrative action) relating to alleged past practices.
`
`Second, OAG fails to plead facts sufficient to state a plausible claim that the service fee
`
`that was in use from September 2016 to April 2018 misled consumers. Most telling are the facts
`
`which OAG concedes in its Complaint:
`
`

`

`o
`
`Instacart disclosed to consumers the service fee charge and the amount of the service fee
`in the main check-out screen prior to purchase (i.e., consumers knew Instacart was charging
`a service fee and the amount of the service fee). See Compl. 1] 20.
`
`o
`
`Instacart disclosed to consumers in the main check-out screen that the service fee was
`
`“optional and variable.” See Compl. 1] 27.
`
`o The term “service fee” does not inherently convey to a reasonable consumer that such a fee
`is a “tip,” as the Complaint does not contend that Instacart’s current 5% service fee (which
`has been in effect since April 2018) is deceptive. Moreover, Instacart’s previous service
`fee disclosure stated that the waivable “service fee” was not a “tip.” See Compl. 1]1] 4, 21,
`24.
`
`Instead, OAG’s complaint is based on the premise that Instacart deceived consumers by providing
`
`consumers with a waivable service fee. Compl. 1] 27. As discussed in detail below, to arrive at the
`
`claim that Instacart should be punished for experimenting with an innovative waivable service fee,
`
`OAG relies on a series of contradictory and conclusory allegations. Taken together, the allegations
`
`fail to establish a plausible claim that Instacart violated the CPPA.
`
`II.
`
`FACTUAL BACKGROUND
`
`Instacart is an innovative technology company that facilitates fast on-demand grocery
`
`delivery services by connecting consumers who wish to purchase grocery items from Instacart’s
`
`local retail partners (e. g., Safeway, Costco, etc.) with personal shoppers who will shop for and/or
`
`deliver the orders. Instacart’s business model is premised on ensuring that both consumers and
`
`personal shoppers enjoy a high-quality eXperience using the Instacart platform. To date, more than
`
`100,000 consumers in DC. have used the Instacart platform to place an order, and more than
`
`20,000 D.C. people have collectively earned more than $30 million (inclusive of tips) by providing
`
`delivery services as full-service shoppers on the Instacart platform. Since its founding in 2012,
`
`Instacart has constantly worked to improve the user eXperience of both sides of its platform to
`
`ensure that consumers receive quick on-demand access to delivery services, and personal shoppers
`
`

`

`receive access to earnings opportunities. As a result, Instacart’s earnings structure for personal
`
`shoppers, and the fees charged to its consumers, has evolved over time.1
`
`In September 2016, Instacart added a waivable service fee for orders by consumers on the
`
`Instacart platform. Compl. 1] l6. Instacart announced the implementation of the waivable service
`
`fee in connection with a change to the personal shopper earnings structure that was designed to
`
`reduce shoppers’ reliance on unpredictable tips. Id. As Instacart stated at the time, the proposed
`
`change from a tip model to a service fee model was “to guarantee a high commission for all
`
`shoppers to help smooth out variations in pay,” so that “[s]hoppers will no longer have to count
`
`on unpredictable tips for the majority of their compensation.” Id. 1] 19. After Instacart announced
`
`its planned change from tips to a waivable service fee, Instacart received feedback from its
`
`shoppers that they wanted to retain the ability for consumers to tip online. Id. 1] 18. Based on this
`
`feedback, Instacart decided to continue to allow consumers to tip at their discretion for exceptional
`
`service. Id.
`
`Instacart disclosed the “optional” nature of the service fee by including a hyperlink labeled
`
`“Change” directly next to the service fee:
`
`1 The preceding facts are presented for background purpose only and are not relevant to the Court’s
`determination of the motion to dismiss. The remaining facts are confined to the facts in OAG’s
`complaint and the full text of documents that are referenced in the Complaint or documents that
`OAG relied upon in the Complaint. Washkoviak v. Student Loan Mktg. Ass ’11, 849 A.2d 37, 40, 44
`n3 (DC. 2004). Citations to facts contained in OAG’s complaint are only for purposes of this
`Motion to Dismiss and should not be considered an admission by Instacart of any fact or
`characterization contained within the Complaint.
`-3-
`
`

`

`
`
`
`
`Compl. 1] 20. When a consumer clicked on the “Change” hyperlink the consumer received a pop-
`
`up screen that provided the ability to modify the service fee and the option to add a tip:
`
`\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ ‘§§5;‘
`
`
`
`mama mnwm
`
`
`
`
`
`
`[la.Ilaa.1111!aI;y,,1,I,,1,I,,1,I,,1,I,,1,I,,1,I,,1,I,I);y,,1,I,,1,I,,1,I,,1,I,,1,I,,1,I,,1,[1,1,11,11,11111111111I,
`
`
`7
` \
`
`§\\\\\\‘\\////
`
`‘kkx
`
`Compl. 1] 33. When a customer clicked on the drop-down arrow for the service fee amount, the
`
`customer was given the option to waive the fee:
`
`
`
`anauuuuuaaaaauuuuuuuuuuuuuuuuuuuuuuua
`
`

`

`Id. Instacart also included additional information directly below the service fee as to the difference
`
`between the service fee and the tip:
`
`tg‘xizss’e. ..
`
`Id.
`
`On April 11, 2018, OAG sent Instacart a letter asking Instacart to voluntarily provide
`
`information relating to its optional service fee. Compl. 1] 4. On April 23, 2018, Instacart announced
`
`that it was modifying its service fee to make it a 5% fixed service fee. Id. OAG does not allege
`
`that Instacart’s service fee that has been in effect since April 23, 2018 violates the CPPA. Rather,
`
`the “relevant time period” for the Complaint is expressly defined as September 2016 through April
`
`2018. Compl. 1] 24.
`
`III.
`
`LEGAL STANDARD
`
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
`
`accepted as true, to state a claim to relief that is plausible on its face.” Potomac Dev. Corp. v.
`
`District of Columbia, 28 A.3d 531, 544 (DC. 2011) (quotation and citations omitted). “Where a
`
`complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the
`
`line between possibility and plausibility of entitlement to relief.” Id. (quotation and citation
`
`omitted). “To satisfy Rule 8(a), plaintiffs must nudge their claims across the line from conceivable
`
`to plausible.” Tingling-Clemons v. District ofColumbia, 133 A.3d 241, 246 (DC. 2016) (quotation
`
`and citation omitted).
`
`The CPPA prohibits the use of unfair and deceptive trade practices. DC. Code § 28-3904.
`
`To survive a motion to dismiss for an alleged CPPA violation, a plaintiff “must allege a material
`
`-5-
`
`

`

`fact that tends to mislead,” or an omission that is “material and ha[s] a tendency to mislead.” Wetzel
`
`v. Cap. City Real Estate, LLC, 73 A.3d 1000, 1005 (DC. 2013). “Bare allegation[s]” that a
`
`company misled consumers are not sufficient to state a claim under the CPPA. Logan v. LaSalle
`
`Bank Nat’l Ass ’n, 80 A.3d 1014, 1019 (DC. 2013). Where “no reasonable person would be []
`
`deceived,” the court should “grant a motion to dismiss on a deceptive practices claim.” Whiting v.
`
`AARP, 637 F.3d 355, 364 (DC. Cir. 2011) (interpreting D.C.’s CPPA and the reasonable consumer
`
`standard as recited in Pearson v. S00 Chang, 961 A.2d 1067, 1075 (DC. 2008)).
`
`IV.
`
`ARGUMENT
`
`A.
`
`OAG Fails to State a Claim that Instacart “Is” 0r “Intends to Violate” the
`
`w
`
`Regardless of whether Instacart’s alleged past conduct constituted an unfair or deceptive
`
`trade practice in violation of the CPPA, which as discussed below in Section IV(B) it does not,
`
`OAG cannot bring this action in DC. Superior Court under DC. Code § 28-3909 as it purports to
`
`do.2 The DC. Code provides that OAG may only file suit in Superior Court for current or intended
`
`violations of the CPPA:
`
`[I]f the Attorney General for the District of Columbia has reason to
`
`believe that any person is using or intends to use [any unfair or
`
`deceptive trade practice], the Attorney General, in the name of the
`
`District of Columbia may bring an action in the Superior Court of
`
`the District of Columbia to obtain a temporary or permanent
`
`injunction prohibiting the use of the method, act, or practice and
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`requiring the violator to take affirmative action,
`
`including the
`
`restitution of money or property.
`
`2 Dismissal of the Plaintiff’ s CPPA claim would not preclude potential administrative remedies
`for the alleged past CPPA violation. See DC. Code §28-3905(g)(2).
`-6-
`
`

`

`DC. Code § 28-3909(a) (emphasis added). Based on this plain language, OAG must plead that
`
`Instacart “is using” or “intends to use” an unfair or deceptive trade practice in violation of the
`
`CPPA in order to obtain injunctive relief and affirmative equitable relief, including restitution, in
`
`DC. Superior Court. See Murphy v. Millennium Radio Grp. LLC, 650 F.3d 295, 302 (3d Cir. 2011)
`
`(“When the statute’s language is plain,
`
`the sole function of the courts—at least where the
`
`disposition required by the [text] is not absurd—is to enforce it according to its terms”) (citation
`
`omitted). Otherwise, the District must proceed through the administrative enforcement process set
`
`forth in DC. Code §28-3 905 for CPPA violations.
`
`Here, the alleged CPPA violations took place in “all or part of the period of September
`
`2016 through April 2018,” which the Complaint defines as “the relevant time period” for this case.
`
`Compl. 1] 24. The Complaint adds that “on April 23, 2018, .
`
`.
`
`. Instacart changed its practices,” and
`
`OAG does not allege that the service fee that Instacart charged after April 23, 2018, and continues
`
`to use, violates the CPPA. Compl. 1] 4. There is no allegation in the Complaint that Instacart intends
`
`to resume the conduct it stopped more than two years ago. Nor can a present intention plausibly
`
`be inferred from alleged past conduct that occurred more than two years ago, as such an inference
`
`would render the statute’s “intends to use” language meaningless because the intent requirement
`
`would automatically be established, which is contrary to basic canons of statutory construction.
`
`See Providence Hosp. V. DC. Dep’i ofEmp. Servs., 855 A.2d 1108, 1114 (DC. 2004) (“Each
`
`provision of the statute should be given effect, so as not to read any language out of a statute
`
`‘whenever a reasonable interpretation is available that can give meaning to each word in the
`
`statute.’”) (citations omitted).
`
`Closely on point is FTC v. Shire VivoPharma, Inc, 917 F.3d 147 (3d Cir. 2019). In that
`
`case, the FTC sought injunctive relief and equitable restitution pursuant to Section 13(b) of the
`
`

`

`FTC Act for unfair and deceptive conduct that had ended five-years before the filing of the
`
`complaint.3 Like DC. Code § 28-3909(a), Section 13(b) of the FTC Act provides for such relief
`
`only when the respondent is violating or is about to violate the law. The FTC alleged that there
`
`was a “cognizable danger” that Shire would again engage in the alleged deceptive conduct because
`
`Shire had both the opportunity and financial incentive to do so. Shire, 917 F.3d at 153. The Third
`
`Circuit rejected that argument, and affirmed the dismissal of the complaint, reasoning as follows:
`
`The crux of the FTC’s claim is that it is entitled to pursue immediate
`
`relief in the District Court under Section 13(b), rather than via the
`
`administrative remedy set forth in Section 5. We begin with the text
`
`of the FTC Act. .
`
`.
`
`. Section 13(b) requires that the FTC have reason
`
`to believe a wrongdoer “is violating” or “is about to violate” the law.
`
`We conclude that this language is unambiguous; it prohibits existing
`
`or impending conduct. Simply put, Section 13(b) does not permit
`
`the FTC to bring a claim based on long-past conduct without some
`
`evidence that the defendant “is” committing or “is about to” commit
`another violation.
`
`Id. at 155-156 (citations omitted). Notably, in reaching this conclusion, the Third Circuit expressly
`
`rejected the FTC’s argument that because the FTC Act is a remedial statute, the Court should
`
`ignore language that conflicts with its remedial purpose. As the Third Circuit stated, “none of the
`
`authority the FTC cites stands for the broad proposition that we can ignore clear statutory language
`
`if it does not promote a remedial interpretation.” Id. at 158 (citing Touche Ross & Co. v. Redington,
`
`442 US. 560, 578 (1979) (explaining that “generalized references” to “remedial purposes” of a
`
`statute will “not justify reading a provision more broadly than its language and the statutory
`
`scheme reasonably permit”)).4
`
`3 “In construing the term ‘unfair or deceptive trade practice’ due consideration and weight shall be
`given to the interpretation by the Federal Trade Commission and the federal courts .
`.
`.
`.” DC.
`Code § 28-3901(d).
`4 Prior to the Third Circuit’s decision in Shire, some courts held that when the past conduct alleged
`is close in time to the filing of the complaint and has not been cured, intent could be inferred from
`-8-
`
`

`

`The plain language of DC. Code § 28-3909(a) is similarly unambiguous, allowing OAG
`
`to bring suits for injunctive relief and restitution in the Superior Court—as distinct from
`
`administrative remedies available under DC. Code § 28-3905 for CPPA violations—only for
`
`unfair and deceptive conduct that an entity “is using or intends to use.” As the Third Circuit
`
`reasoned in Shire, “[t]he FTC’s understandable preference for litigating under Section 13(b), rather
`
`than in an administrative proceeding, does not justify its expansion of the statutory language.” 917
`
`F.3d at 159. The same is true for OAG, as it fails to state a claim under Section 28-3909(a).
`
`B.
`
`OAG Fails to State a Plausible Claim that Instacart Previously Violated the
`CPPA
`
`Apart from OAG’s failure to allege a claim under Section 28-3909(a), OAG has also failed
`
`to allege a substantive CPPA violation. OAG’s allegations of deception are conclusory, and they
`
`are contradicted by more specific facts found elsewhere in the Complaint or contained in
`
`documents referred to in the Complaint. In deciding a motion to dismiss, this Court may properly
`
`consider documents referenced in a complaint, or which the plaintiff possessed or relied upon in
`
`the complaint. Washkoviak, 849 A.2d at 40, 44 n3.
`
`1.
`
`Instacart Clearly Disclosed that the Service Fee Was Waivable
`
`Plaintiff argues that Instacart failed to disclose that a consumer could modify and waive
`
`the service fee in the relevant period. Compl. 1] 3. Yet, that claim is contradicted by the other more
`
`specific allegations in the Complaint. Indeed, the Complaint acknowledges that a reasonable
`
`consumer viewing the main check-out screen would have understood that the service fee was
`
`“optional and variable.” Compl. 1] 27. The Complaint also acknowledges that Instacart clearly
`
`the past conduct in those narrow circumstances. But that is not the case here where the Complaint
`eXpressly states that the conduct at issue stopped more than two years ago and there is no allegation
`that Instacart has any intention to resume its past conduct.
`
`-9-
`
`

`

`disclosed in its check-out flow the service fee charge and the amount of the charge. See id.
`
`Therefore, OAG has acknowledged that prior to deciding to submit an order, a consumer would
`
`have seen the service fee charge and the hyperlink labeled “Change” directly next to the service
`
`fee:
`
`
`
`
`
`
`
`i_
`'\
`\\\\\\\\\\\\\\
`
`xxx\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\€
`
`\
`
`When a consumer clicked on the hyperlink to change the service fee, a pop-up screen appeared
`
`that provided the consumer with a drop-down menu that eXpressly gave the consumer the option
`
`to waive the service fee:
`
`figs?
`
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`
`
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`
`/,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
`
`-10-
`
`

`

`Not only did these service fee disclosures clearly communicate the “optional and variable”
`
`nature of the service fee, but the format of the disclosures complied with all of the FTC’s guidelines
`
`for the use of linked disclosures:5
`
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`
`This is important, if not dispositive, because the DC. Code provides that “[i]n construing the term
`
`‘unfair or deceptive trade practice’ due consideration and weight shall be given to the interpretation
`
`by the Federal Trade Commission .
`
`.
`
`. .” DC. Code §28-3901(d).
`
`2.
`
`Instacart Clearly Disclosed to Consumers that the Service Fee Was Not
`
`a T111
`
`Plaintiff also alleges that Instacart failed to disclose that the service fee was not a tip.
`
`Compl. 1] 3. But, this is directly contrary to the common understanding of the term “service fee,”
`
`as recognized by the absence of any allegation that the imposition of a percentage service fee or
`
`the use of the term “service fee” inherently conveys to a reasonable consumer that the fee is a “tip.”
`
`Rather, the Complaint only asserts (without factual support) that the waivable 10% service fee, as
`
`opposed to a fixed service fee, transformed the common understanding and usage of the term
`
`5 Federal Trade Commission, .com Disclosures: How to Make Efi’ective Disclosures in Digital
`Advertising (March 2013), https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-
`staff-revises-online-advertising-disclosure-guidelines/l30312dotcomdisclosures.pdf
`-11-
`
`

`

`“service fee.”6 But, OAG provides no factual support for the conclusory assertion that a reasonable
`
`consumer interprets all variable service fees as constituting a “tip.” Indeed, it is telling that OAG
`
`did not identify any complaints from consumers to support this conclusory assertion. To the
`
`contrary, the position from OAG appears to be that companies should avoid experimenting with
`
`innovative waivable fees, and rather impose mandatory fixed fees.
`
`Even setting aside the ordinary meaning of “service fee,” the Complaint acknowledges that
`
`Instacart disclosed that the waivable service fee had a different purpose than a tip. Moreover, none
`
`of the specific representations identified by OAG in the Complaint state that the service fee would
`
`be paid directly to the shoppers involved in a consumer’s order. To the contrary, the Instacart
`
`representations identified in the Complaint state that:
`
`o
`
`O
`
`o
`
`the purpose of the service fee is “‘to provide high guaranteed commissions to the
`shoppers 0n the platform’ and ‘to guarantee a high commission for all shoppers to
`777,
`help smooth out variations in pay ,
`
`“100% of the variable service amount is used to pay all shoppers more consistently
`for each and every delivery, not just the last shopper to touch the order”; and
`
`Instacart uses the service amount “to provide competitive pay to all the shoppers”
`who work with Instacart. Unlike a tip, which can only go to the shopper delivering
`your order, a service amount allows “[us] to pay all shoppers (including those, for
`example, that also pick out ordered items in the store).”
`
`Compl. 1] 89 (emphasis added). Further, when a customer clicked through to change the service
`
`fee, they were presented with the “Service Amount” and “Tip” as two separate and distinct options
`
`with disclosures that made clear that the service amount was not a tip:7
`
`including restaurants, banking, and travel and
`6 “[M]any industries collect service charges,
`tourism. .
`. [that] may cover services rendered to the consumer, or they may cover administrative
`or processing cost.” Will Kenton, Service Charge, INVESTOPEDIACOM (Aug. 10, 2020),
`https://www.investopedia.com/terms/s/service-charge.asp (noting that “[s]ervice charges are also
`called service fees”). It is also commonly understood that “[s]ervice charges are paid directly to
`the company.” See id.
`7 See Compl.1l 33.
`
`-12-
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`

`

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` 7
`/
`
`3.
`
`Instacart Used the Service Fee for its Stated Pur 0se
`
`OAG fails to allege any facts that demonstrate that Instacart failed to use the service fee
`
`for its stated purpose, i.e., “to pay all shoppers more consistently for each and every delivery, not
`
`just the last shopper to touch the order.” The only fact that OAG alleges to support this allegation
`
`is that “Instacart never earmarked or set aside the amounts collected as service fees to pay its
`
`shoppers.” Compl. 1117. But the allegation that the funds were not specifically earmarked is a red
`
`herring. The Complaint contains no allegations that Instacart profited off the service fee (i.e., the
`
`amount collected from the service fee exceeded the amount paid to full-service shoppers). Nor
`
`could OAG make such an allegation, since—as OAG knows and omits from its Complaint—the
`
`records on which OAG relies for its restitution claim show that the total amount that Instacart paid
`
`to DC. full-service shoppers during the relevant time period dwarfed the amount of service fees
`
`paid by DC. consumers.8
`
`8 The records Instacart provided to the Attorney General and on which the Attorney General is
`relying for its restitution claim show that during the relevant period, Instacart collected $3,357,296
`in service fees while paying its full-service shoppers $11,645,246.
`-13-
`
`

`

`OAG alleges that “[c]hanges in consumers’ tipping practices confirm that consumers were
`
`misled regarding the purpose of the service fee and believed that the service fee operated as a tip.”
`
`Compl.
`
`1] 63. However, a change in tipping practices is equally consistent with consumer
`
`knowledge that the service fees were different than tips, because (as disclosed) the service fee also
`
`benefited shoppers by providing “competitive pay to all the shoppers working with Instacart.”
`
`Compl. 1] 33. Thus, the alleged change in tipping practices does not “nudge” Plaintiff” s CPPA
`
`claim “across the line from conceivable to plausible.” See Tingling—Clemons, 133 A.3d at 246.
`
`4.
`
`The Alleged “Free Delivery” Promotions did not Deceive Consumers
`
`into Paying the Service Fee
`
`Finally, OAG makes the conclusory allegation “on information and belief ’ that Instacart
`
`deceptively utilized “free delivery promotions” during the relevant time period because it did not
`
`set the default service fee to zero for the orders subject to the promotion. Compl. 1] 61. But, OAG
`
`has not alleged any facts supporting this conclusory allegation such as, when the free delivery
`
`promotions were used, to whom were they marketed, and the terms and conditions. The claim
`
`should be dismissed on that basis alone. See Flocco v. State Farm Mat. Auto. Ins. Co., 752 A.2d
`
`147, 164 (DC. 2000). In any event, as the documents cited in the Complaint make clear:
`
`(1)
`
`Instacart never represented that the “service fee” was either a delivery fee or a direct payment to
`
`full-service shoppers; (2) the waivable nature of the fee was disclosed, i.e., a customer always had
`
`the ability to decide not to pay the service fee; and (3) Instacart fully disclosed the amount of the
`
`charge prior to the consumer deciding to place the order. See Saucier v. Countrywide Home Loans,
`
`64 A.3d 428, 442 (DC. 2013).
`
`V.
`
`CONCLUSION
`
`For the reasons set forth above, Instacart respectfully requests that this Court grant its
`
`Motion to Dismiss Count I of Plaintiff” s Complaint.
`
`-14-
`
`

`

`Dated: October 16, 2020
`
`Respectfully Submitted,
`
`/s/ Jonathan A. Direnfeld
`
`William F. St