Grubhub will pay $25 million to resolve allegations that it misled drivers about their potential earnings on the food delivery platform and customers about the cost of their delivery.
Grubhub, based in Chicago, was accused by the Federal Trade Commission and the state attorney general of Illinois of “engaging in an array of unlawful practices” aimed at “deceiving” both workers and diners about the expense of doing business on the platform.
An internal communication from a former executive said that the strategy of raising service fees in a way that was deceptive, undermining confidence, and really more costly for customers was among the messages the agencies claimed to have discovered that illustrated Grubhub’s purportedly illegal actions.
According to the agencies, the end result was frequently a final charge that was occasionally more than twice what the platform user was initially promised.
The civil action also stated that Grubhub used deceptive advertising to recruit drivers by claiming hourly pay rates “well above what drivers could realistically expect to earn,” according to a release.
Lastly, Grubhub misrepresented restaurants that had not registered on its site. The case claims that up to 325,000 independent eateries have used Grubhub’s platform during the length of its existence, according to the agencies.
Grubhub is required to make platform modifications in addition to the settlement money, such as informing customers of the entire cost of delivery, truthfully disclosing driver compensation, and only listing eateries with permission.
FTC Chair Lina M. Khan said in a statement, “Our investigation revealed that Grubhub unfairly harmed the reputation and profits of restaurants that did not partner with Grubhub, deceived its drivers, and tricked its customers in an effort to drive scale and accelerate growth.”
The action taken today holds Grubhub responsible, stops these unlawful activities, and secures almost $25 million for the victims of Grubhub’s deceptive conduct. Gig platforms are not immune from the existing rules.
Grubhub refuted the accusations in a statement, but it did acknowledge the payment and promise to alter its business practices.
“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward,” it continued.
The agencies said they had lowered their $140 million judgment against the company to what Grubhub could afford. According to them, Grubhub will be subject to the whole penalty if it is discovered that it misrepresented its financial situation.
Marc Lore, the former CEO of Walmart’s eCommerce division, is planning to acquire Grubhub and turn it into Wonder Group, a food delivery and takeout business.
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