Grubhub settles with the FTC for adding restaurants without its consent

Grubhub agreed to pay $25 million to install charges by the Federal Trade Commission (FTC) and the Illinois Attorney General. The company has been accused of a laundry list of sketchy behavior, including misleading customers about delivery fees, misleading delivery drivers about routes and listing restaurants on the platform without consent. Last month, the Food delivery startup Wonder has bought Grubhub for a tenth of what it was worth during the pandemic.

Under the proposed settlement, Grubhub will make changes to remedy the problems. The requirements read like a “stop doing that” list, one per charge. This includes notifying customers of full delivery costs, being honest with drivers about payment and listing restaurants only with their consent.

The FTC says that Grubhub, in order to appear more robust than it was, added as many as 325,000 unaffiliated restaurants to the platform without permission since at least 2019. Customers ordering from these businesses discovered added fees and “numerous problems with order”. Meanwhile, the agency says restaurants “endured the wrath of diners,” leading to damaged reputations and lost money.

The company also added junk fees after announcing to customers that they were paying a low-cost flat fee for deliveries. The FTC says Grubhub labeled them “service fees” or “small order fees,” but they were simply shipping fees under another name. The agency quotes a former Grubhub executive as calling it a “price shell game.”

The FTC also accused the company of blocking the accounts of customers with large gift card balances, leaving them with no way to regain access. The agency said that customers who complained to the company were either not told that their accounts were blocked or were not given any meaningful way to contest the ban.

The false pay allegations include advertisements that Grubhub drivers could earn up to $40 per hour in the New York area. In reality, the average driver pay in that area was about $10 an hour — and only 0.1 percent of drivers are said to be making the advertised rate. And in Chicago, an ad promised to earn up to $26 per hour when the median was $11.

Grubhub he denies the allegations, but says he has set up to put the matter behind it. “At Grubhub, we are committed to transparency so that every day diners, restaurants and drivers can make well-informed choices about doing business with us,” the company wrote in a statement. “While we categorically 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 damaged the reputation and revenue of restaurants that did not partner with Grubhub — all to drive scale and accelerate growth,” the FTC Chairman Lina M. Khan wrote in a statement. “Today’s action holds Grubhub accountable, ending these illegal practices and securing nearly $25 million for people defrauded by Grubhub’s tactics. There is no ‘gig platform’ exemption to the laws on the books”.