Grubhub agreed to pay $25 million to settle charges from the Federal Trade Commission (FTC) and the Illinois Attorney General. The company was accused of a long list of dubious behavior, including misleading customers about delivery charges, misleading delivery drivers about income, and listing restaurants on the platform without consent. Last month, food delivery startup Wonder bought Grubhub for a tenth of its value during the pandemic.
Under the proposed settlement, Grubhub must make changes to fix the problems. The requirements read like a “stop doing that” list, one per position. This includes notifying customers of total delivery costs, being honest with drivers about payment, and listing restaurants only with their consent.
The FTC says Grubhub, to appear more robust than it was, added up to 325,000 unaffiliated restaurants to the platform without permission since at least 2019. Customers ordering from those businesses discovered additional fees and “numerous ordering issues.” . Meanwhile, the agency says restaurants “borne the brunt of diners' wrath,” resulting in reputational damage and lost money.
The company also allegedly added junk fees after announcing to customers that they would pay a low-cost flat rate for deliveries. The FTC says Grubhub labeled them as “service fees” or “small order fees,” but they were simply shipping fees by another name. The agency quotes a former Grubhub executive who called it a “game of pricing ploy.”
The FTC also accused the company of locking the accounts of customers with large gift card balances, leaving them no way to regain access. The agency said diners who complained to the company were not informed that their accounts were blocked or given any meaningful way to challenge the ban.
The false wage allegations include advertising that Grubhub drivers could earn up to $40 an hour in the New York area. In reality, the average driver wage in that area was about $10 per hour, and only 0.1 percent of drivers are said to have earned the advertised rate. And in Chicago, one ad promised earnings of up to $26 an hour when the average was $11.
grubhub denies the accusations, but says he reached an agreement and put the matter behind him. “At Grubhub, we are committed to transparency so that every day diners, restaurants, and drivers can make well-informed decisions about doing business with us,” the company wrote in a statement. “While we categorically deny the allegations made by the FTC, many of which are erroneous, misleading or no longer applicable to our business, we believe that resolving this matter is in Grubhub's best interest and allows us to move forward.”
“Our investigation found that Grubhub misled its customers, misled its drivers, and unfairly damaged the reputation and revenue of restaurants that did not partner with Grubhub, all to drive scale and accelerate growth,” the FTC chair wrote. , Lina M. Khan, in a statement. “Today’s action holds Grubhub accountable, ending these illegal practices and securing nearly $25 million for people deceived by Grubhub’s tactics. “There is no exemption from current laws for 'concert platforms'.”
