Grubhub settles with the FTC over adding restaurants without their consent

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

Under the proposed settlement, Grubhub has to 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 pay and listing restaurants only with their consent.

The FTC says Grubhub, 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 those businesses discovered added fees and “numerous ordering problems.” Meanwhile, the agency says the restaurants “bore the brunt of diners’ ire,” leading to damaged reputations and lost money.

The company also allegedly added junk fees after advertising to customers that they’d pay a low-cost, flat rate for deliveries. The FTC says Grubhub labeled them “service fees” or “small order fees,” but they were simply delivery fees under another name. The agency quotes a former Grubhub executive as calling it a “pricing shell game.”

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

The false pay allegations include advertising that Grubhub drivers could make up to $40 hourly in the New York area. In reality, the median driver pay in that area was around $10 hourly — and only 0.1 percent of drivers are said to have made the advertised rate. And in Chicago, an ad promised earnings of up to $26 hourly when the median was $11.

Grubhub denies the allegations but says it settled to put the matter behind it. “At Grubhub, we’re committed to transparency so that every single day diners, restaurants and drivers can make well-informed choices to do business with us,” the company wrote in a statement. “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.”

“Our investigation found that Grubhub tricked its customers, deceived its drivers, and unfairly damaged the reputation and revenues of restaurants that did not partner with Grubhub — all in order to drive scale and accelerate growth,” FTC Chair Lina M. Khan wrote in a statement. “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. There is no ‘gig platform’ exemption to the laws on the books.”