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Grubhub Settles FTC Lawsuit for $25 Million

Grubhub has reached a settlement with the Federal Trade Commission (FTC), agreeing to pay $25 million to resolve allegations that it misled customers and drivers and adversely affected small businesses. The settlement entails significant changes to the Grubhub platform, particularly in how it presents pricing to customers.

The FTC’s lawsuit highlighted that Grubhub misrepresented delivery costs. According to the complaint, the company initially advertised lower delivery fees to entice customers but subsequently added undisclosed “service” fees, leading to higher final prices for consumers. This practice began around 2019, and as a result, many users faced confusion over the actual cost of their orders.

Furthermore, the FTC claimed that Grubhub advertised “free” or “$0” deliveries for its Grubhub Plus subscription, yet many users reported being charged for delivery. The agency emphasized that while signing up for the subscription was straightforward, customers often encountered difficulties when attempting to cancel it. In certain instances, users with substantial gift card balances reported that their accounts were blocked.

The FTC asserted that Grubhub’s practices hid additional fees, inflating the overall cost for customers.

Additionally, the FTC accused Grubhub of listing restaurants on its platform without their consent, which allegedly led to a negative experience for customers and harmful feedback for restaurants that had not authorized their inclusion on the service. The commission stated that at one point, Grubhub had over 325,000 unaffiliated restaurants on its platform, comprising more than half of its total listings.

Under the terms of the settlement, Grubhub is now mandated to disclose the complete cost of delivery to customers upfront. The company is prohibited from imposing “junk fees” and can no longer feature unaffiliated restaurants on its platform. It must also substantiate claims regarding driver earnings with verifiable evidence, provide notifications to customers facing bans, and establish a system for appeal. Moreover, the process for canceling the Grubhub Plus subscription is required to be user-friendly.

Grubhub maintains its innocence regarding the allegations. Spokesperson Najy Kamal stated, “While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.” The company also elaborated on this settlement in a statement posted on its website.

Initially, the FTC sought a much larger penalty of $140 million, but that amount was “partially suspended” due to Grubhub’s financial circumstances. The $25 million settlement is designated for compensating impacted customers. However, the FTC warned that it could demand the full judgment amount if Grubhub is later found to have misrepresented its financial status during the proceedings.

Source
www.theverge.com