Grubhub agreed to pay $25 million in costs to the Federal Trade Commission (FTC) and the Illinois Attorney General. The company has been accused of a range of sketchy conduct, including misleading customers about delivery costs, deceiving delivery drivers about their income and listing restaurants on the platform without permission. Last month, food delivery startup Wonder bought Grubhub for a tenth of what it was worth during the boom.
Under the proposed settlement, Grubhub must make changes to fix the problems. The requirements read like a list of “do nots”, one for each charge. This includes notifying customers of the full cost of delivery, being honest with drivers about payment and listing restaurants only with their permission.
The FTC says Grubhub, in order 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 experienced additional fees and “multiple ordering problems.” Meanwhile, the organization says the restaurants are “burdened by the anger of the diners,” which has resulted in reputational damage and financial loss.
The company allegedly added unwanted fees after advertising to customers that they would pay a low, low price for delivery. The FTC says Grubhub listed “service fees” or “small order fees,” but they were delivery fees under a different name. The agency quotes a former Grubhub executive as calling it a “price shell game.”
The FTC also accused the company of freezing the accounts of customers with large gift card balances, leaving them with no way to regain access. The agency said consumers who complained to the company were not told their accounts had been blocked or given a reasonable way to challenge the ban.
The alleged false payments include advertising that Grubhub drivers can make up to $40 an hour in the New York area. In fact, the average driver’s pay in that area was about $10 an hour – and only 0.1 percent of drivers are said to have made the advertised rate. And in Chicago, an ad promised wages as high as $26 an hour when the median was $11.
Grubhub denies these allegations but says it has decided to put the issue behind it. “At Grubhub, we are committed to transparency so that all diners, restaurants and drivers can make informed decisions about doing business with us,” the company wrote in a statement. “While we strongly deny the allegations made by the FTC, many of which are false, misleading or no longer applicable to our business, we believe that resolving this matter is in Grubhub’s best interest and allows us to move forward.”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 harmed the reputation and profits of non-Grubhub restaurants — all in order to improve quality and accelerate growth,” FTC Chairwoman Lina M. Khan wrote in her letter. statement. “Today’s action holds Grubhub accountable, ends these illegal practices and recovers nearly $25 million from people who were defrauded by Grubhub’s tactics.” No ‘gig arena’ is exempt from the laws on the books.”
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