Grubhub has been ordered to pay $140 million after committing unlawful practices harming customers, workers, and small businesses.
However, based on the company’s incapacity to pay the full amount, $115 million of the penalty was suspended, leaving $25 million due immediately.
According to the Federal Trade Commission (FTC), the violations include adding unaffiliated restaurants to the platform without permission, misleading drivers about their potential earnings, misrepresenting the actual delivery costs on advertisements, and blocking customers’ access to their accounts and funds.
The FTC and the Illinois Attorney General allege that since 2019, Grubhub added unaffiliated restaurants to its platform without their permission to boost the company’s growth.
Because of this, customers who searched these restaurants online were directed to Grubhub, diverting them from ordering from and paying the restaurants directly for delivery services.
Without proper integration with Grubhub’s system, the restaurants were swamped with orders from Grubhub drivers, including for food the stores did not serve.
Since Grubhub drivers could only pay using Grubhub credit cards, which were sometimes declined due to insufficient funds, restaurants were left unpaid for food they had already prepared.
Frustrated customers also blamed the unaffiliated restaurants for food delivered late or in poor condition.
Moreover, Grubhub misrepresented its actual delivery costs, with the final price often more than double what was advertised. The misrepresentation includes its subscription service advertising “free” or “$0” delivery, but the company still charged subscribers a delivery fee.
In addition, Grubhub deceived drivers about their potential earnings, inflating hourly pay rates well above what could realistically be earned.
A complaint also claimed Grubhub regularly “blocked” diners’ accounts with large balances of gift card funds without warning, and 97 per cent of these accounts were never unlocked.
“There is no ‘gig platform’ exemption to the laws on the books,” said Lina M Khan, FTC chair.
“This settlement is the culmination of a multi-year investigation into deceptive and illegal business practices perpetrated by Grubhub,” said Kwame Raoul, Illinois Attorney General.
If Grubhub is found to have misrepresented its financial position, the full judgment of $140 million will be payable immediately.
Earlier this year, food hall concept Wonder acquired Grubhub from Just Eat Takeaway.com for $650 million.
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