New York City residents have been hit with a surprise charge on their grocery delivery orders: a "regulatory response fee" imposed by Instacart. The company claims this is a direct result of the city's new minimum wage rule for grocery delivery workers, which requires them to pay at least $21.44 an hour, not including tips.
The move has sparked criticism from regulators and lawmakers who argue that it's a form of "drip pricing" – a tactic where companies charge customers small amounts that add up over time. This can lead to consumers being misled into buying more expensive items or making larger purchases without realizing the true cost.
According to experts, the fee is not transparent enough for consumers, making them less likely to question its validity. "It makes them more likely to buy and more likely to buy more expensive items," says Vicki Morwitz, a professor of business and marketing at Columbia Business School.
The new regulation has also led to grocery delivery apps being required to present customers with the option to tip workers during checkout, with a default rate of at least 10% preselected. This is aimed at addressing low pay and unpredictable earnings for gig economy workers.
However, companies like Instacart argue that the increased costs will ultimately affect consumers, small businesses, and delivery workers themselves. "For months, we raised clear, data-backed concerns that the policy would increase grocery delivery costs for New Yorkers," says Thomas McNeil, Instacart's government affairs senior manager.
The city is looking into the issue, but policymakers are taking a step further by targeting similar pricing structures across the board. Under the Biden administration, the Federal Trade Commission passed a rule requiring ticket sellers, hotels, and rental platforms to disclose fees upfront.
While regulators aim to protect consumers from hidden costs, experts warn that companies may still find ways to increase prices without being transparent. As Morwitz notes, "I think it's essential that consumers know upfront how much they're going to be paying versus being affected by this kind of presentation."
The move has sparked criticism from regulators and lawmakers who argue that it's a form of "drip pricing" – a tactic where companies charge customers small amounts that add up over time. This can lead to consumers being misled into buying more expensive items or making larger purchases without realizing the true cost.
According to experts, the fee is not transparent enough for consumers, making them less likely to question its validity. "It makes them more likely to buy and more likely to buy more expensive items," says Vicki Morwitz, a professor of business and marketing at Columbia Business School.
The new regulation has also led to grocery delivery apps being required to present customers with the option to tip workers during checkout, with a default rate of at least 10% preselected. This is aimed at addressing low pay and unpredictable earnings for gig economy workers.
However, companies like Instacart argue that the increased costs will ultimately affect consumers, small businesses, and delivery workers themselves. "For months, we raised clear, data-backed concerns that the policy would increase grocery delivery costs for New Yorkers," says Thomas McNeil, Instacart's government affairs senior manager.
The city is looking into the issue, but policymakers are taking a step further by targeting similar pricing structures across the board. Under the Biden administration, the Federal Trade Commission passed a rule requiring ticket sellers, hotels, and rental platforms to disclose fees upfront.
While regulators aim to protect consumers from hidden costs, experts warn that companies may still find ways to increase prices without being transparent. As Morwitz notes, "I think it's essential that consumers know upfront how much they're going to be paying versus being affected by this kind of presentation."
I'm tellin' ya, somethin's fishy goin' on here. This "regulatory response fee" sounds like a sneaky way for Instacart to pass on the costs of higher wages to consumers. I mean, what's next? They'll be addin' some kinda "delivery surcharge" just 'cause we got some new rules in place 
. And don't even get me started on this whole "drip pricing" thing - it's like they're tryin' to confuse us into buyin' more stuff without us even realizin' it. I think the city's onto somethin' here, but Instacart's just tryin' to weasel their way outta payin' up 
. Mark my words, this is just the beginnin' of a bigger problem... 
! They're passing on the higher labor costs from the city to us, their customers. I mean, I get that workers need a living wage and all that, but come on... it's not fair to make me pay extra just because of it 
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The thing is, it's not just about Instacart - this is a slippery slope. If they can get away with this now, who knows how much more we'll be charged in the future? It's like, we need to stay vigilant and make sure our voices are heard. We don't wanna be stuck with these hidden fees that add up over time! 
Its just another way for companies to keep a finger on the pulse of customer spending. Anyway, I think its all about setting clear expectations and keeping customers informed - thats the only way to avoid getting taken advantage of! 
It's not transparent enough for consumers to scrutinize its validity, which is just asking for trouble. Vicki Morwitz is spot on – it makes people more likely to overspend. And let's not forget the tipping issue... 10% default rate? That's a lot of extra cash going straight into workers' pockets 
maybe the gov can work out a better system tho like make sure companies disclose all their fees upfront 