Grubhub reached a settlement with the U.S. Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul on Tuesday, resolving allegations of deceptive practices related to fees, restaurant listings, and driver pay. The settlement mandates that Grubhub discontinue these practices and pay $25 million.
The initial judgment sought by the agencies was $140 million. However, this amount was reduced to reflect Grubhub’s current financial capacity, according to the FTC and Illinois Attorney General’s office. The full penalty will be reinstated if it is discovered that Grubhub misrepresented its financial standing.
A Grubhub spokesperson stated that while the company “categorically denies the allegations made by the FTC,” settling the matter is in the best interest of the company. The spokesperson also characterized many of the allegations as “wrong, misleading or no longer applicable.”
The lawsuit alleged that Grubhub concealed fees until the final stages of the ordering process, misled Grubhub+ subscribers about fee avoidance, and prevented some customers from utilizing gift card balances.
Furthermore, the FTC and Illinois asserted that Grubhub misrepresented potential driver earnings, claiming drivers could earn up to $26 per hour when only the top 2% of drivers actually achieved those rates. The agencies also claimed that thousands of restaurants were added to the platform without their consent, leading to order delays and customer dissatisfaction.
The FTC and Illinois argued that these practices constituted violations of both federal and state law, specifically targeting the deceptive nature of Grubhub’s operations. They stated that these misrepresentations allowed Grubhub to rapidly expand its restaurant offerings and scale its business at the expense of restaurants and consumers.
In conclusion, Grubhub’s settlement with the FTC and Illinois Attorney General underscores the importance of transparency and fair practices in the food delivery industry. The $25 million payment and mandated cessation of misleading practices signify a significant step towards addressing concerns about consumer protection and fair competition within the sector. This case serves as a reminder for businesses operating in the digital marketplace to prioritize ethical conduct and accurate representation in their interactions with customers, restaurants, and drivers.
