Grubhub Agrees to Massive Settlement After Damning Federal Investigation
Grubhub will pay a $25 million settlement to federal authorities after an investigation revealed that the food delivery app deceived customers about costs, misled workers about earnings and listed restaurants on the platform without their permission.
The settlement unveiled Tuesday by the Federal Trade Commission requires Grubhub to make “substantial changes to its operations across a number of areas,” according to a statement from the agency.
Beyond the $25 million settlement, the changes involve “telling consumers the full cost of delivery, honestly advertising pay for drivers, and listing restaurants on its platform only with their consent.”
Grubhub representatives said they “categorically deny” the claims from the FTC, but they will pay the suspended judgment of $25 million to move forward.
The company, which is based in Chicago, Illinois, agreed to “make changes to its platform to make it even easier for diners to understand the fees we charge, how we advertise earnings potential for delivery partners, and how we communicate about Grubhub+, among other updates,” according to CBS News.
The FTC said that Grubhub has “added unaffiliated restaurants to its platform without their permission” since at least 2019.
That practice allegedly enabled the firm to increase growth, since “the more restaurants that appeared to be available on a platform, the more likely consumers are to use it.”
But the practice also resulted in higher expenses for customers, who paid greater fees for those orders.
The restaurants were allegedly blamed for Grubhub’s failures and saw “damaged reputations and lost revenue.”
When restaurants contacted Grubhub to be removed from the app, staff members would allegedly “try to sell them paid partnerships” and often only pulled the restaurants from the platform “after they threatened legal action.”
FTC Chair Lina Khan commented that the company pursued the deceptive practices “all in order to drive scale and accelerate growth.”
“Today’s action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25 million for the people cheated by Grubhub’s tactics,” she said.
“There is no ‘gig platform’ exemption to the laws on the books.”
The settlement included a $140 million monetary judgment, but was partially suspended “based on the company’s inability to pay the full amount,” according to the FTC.
Most of the diminished amount of $25 million “will be used to refund consumers harmed by the company’s conduct,” the agency said.
The company remarked in a statement that “we believe the FTC agreed to suspend a portion of the judgment because we negotiated with them in good faith and provided extensive details about our business and financial performance,” according to CNBC.
Illinois Attorney General Kwame Raoul added in a statement shared by the FTC that the settlement was the “culmination of a multi-year investigation into deceptive and illegal business practices.”
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