Food delivery platform Grubhub must pay $25 million and make substantial operational changes following a settlement with the Federal Trade Commission and Illinois Attorney General Kwame Raoul over allegations of deceptive business practices, officials announced Tuesday.
What Happened: The settlement resolves charges that Grubhub deceived customers about delivery costs, misled drivers about potential earnings, and listed restaurants on its platform without permission. According to the FTC’s complaint, the company had listed up to 325,000 unaffiliated restaurants – more than half of its total listings.
“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,” said FTC Chair Lina Khan in the announcement.
The settlement requires Grubhub to disclose true delivery costs and eliminate hidden fees. The company must also stop listing unaffiliated restaurants and provide evidence to support any driver earnings claims. For consumer accounts that were blocked, Grubhub must create an appeals process and ensure quick access to funds when blocks are removed.
Why It Matters: Internal company documents cited in the complaint revealed executives knew their pricing strategy was “misleading” and “eroding trust.” In one market, the FTC found drivers earned a median of $10 per hour despite advertisements promising up to $40 per hour.
While the FTC originally sought a $140 million judgment, the final $25 million settlement reflects Grubhub’s reported inability to pay the full amount. Most of the settlement funds will go toward consumer refunds.
The case highlights growing regulatory scrutiny of gig economy platforms. “There is no ‘gig platform’ exemption to the laws on the books,” Khan emphasized in her statement.
In November, Just Eat Takeaway.com JTKWY revealed the sale of its U.S. food delivery business, Grubhub, to Wonder Group at an enterprise value of $650 million.
Read Next:
Image Via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
