Grubhub will pay $25 million in a settlement for misleading customers about delivery fees and misleading drivers about how much they could earn on its food delivery platform.
The Federal Trade Commission and Illinois Attorney General have accused Chicago-based Grubhub of a “series of illegal practices” designed to “deceive” restaurants and employees alike about the costs of transactions on its platform. accused of being involved.
The agency said it had discovered messages demonstrating Grubhub’s allegedly illegal tactics. It included an internal message from a former executive that said the tactic of adding to service fees in a way that was “misleading and eroded trust” for consumers was “really expensive.” .
As a result, the final price was sometimes more than double the price initially advertised to platform users, the agencies said.
According to a release accompanying the civil complaint, Grubhub also allegedly falsely advertised to attract drivers with hourly wages that were “far above what drivers could realistically expect to earn.”
Finally, Grubhub falsely promoted restaurants on its platform that were not registered. Throughout its existence, Grubhub has had 325,000 unaffiliated restaurants on its platform, the agency said, according to the complaint.
In addition to the settlement, Grubhub must also make changes to its platform, including communicating full delivery costs to consumers, honestly advertising driver salaries, and only listing restaurants with consent. .
“Our investigation found that Grubhub deceived customers, misled drivers, and unfairly harmed the reputations and revenues of restaurants not affiliated with Grubhub,” said FTC Chair Lina M. Khan. “It was all about scaling up and accelerating growth,” said FTC Chair Lina M. Khan. statement.
“Today’s action holds Grubhub accountable, puts an end to these illegal practices, and secures approximately $25 million for those who fell for Grubhub’s tactics. “Gig Platform” Law There are no exemptions. ”
Grubhub acknowledged the settlement in a statement and said it would change its operations, but denied the charges.
“While we categorically deny the FTC’s allegations, many of which are false, misleading, and no longer apply to our business, it is in Grubhub’s best interest to resolve this matter. “We believe that we can move forward,” the company said.
The agencies had sought a $140 million judgment against the company, but said the amount had been reduced to an amount Grubhub could afford. If Grubhub is found to have misrepresented its financial position, the full penalty will apply.
Grubhub will be sold to Wonder Group, a food delivery and takeout service led by former Walmart e-commerce chief Marc Lore.
