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Grubhub will pay $25 million to settle charges it misled customers about the cost of their delivery and drivers about how much they could earn on the food-delivery platform.
The Federal Trade Commission and the attorney general for the state of Illinois accused Chicago-based Grubhub of engaging “in an array of unlawful practices” designed to “deceive” diners and workers alike about the cost of doing business on the platform.
The agencies said they had uncovered messages that demonstrated Grubhub’s allegedly illicit tactics, including an internal message from a former executive stating that the tactic of adding service fees in a way that was “misleading, eroding trust,” and “truly more expensive” for consumers.
The upshot was often a final price sometimes more than double what it originally advertised to a platform user, the agencies said.
Grubhub also allegedly engaged in false advertising to attract drivers, citing hourly pay rates “well above what drivers could realistically expect to earn,” according to a release accompanying the civil complaint.
Finally, Grubhub falsely advertised restaurants on its platform that had not signed up with it. According to the complaint, Grubhub has, over the course of its existence, as many as 325,000 unaffiliated restaurants on its platform, the agencies said.
In addition to the settlement payment, Grubhub must also make changes to its platform that include telling consumers the full cost of delivery, honestly advertising pay for drivers, and only listing restaurants that have given their consent.
“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 said 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.”
In a statement, Grubhub acknowledged the settlement and said it would make changes to its operations, but denied the charges.
“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward,” it said.
The agencies had sought a $140 million judgment against the company, but reduced it to what Grubhub is able to pay, the agencies said. If Grubhub is found to have misrepresented its financial position, the full penalty will apply, they said.
Grubhub is set to be sold to Wonder Group, a food delivery and takeout service headed by Marc Lore, the former head of Walmart’s eCommerce unit.
Rob Wile is a Pulitzer Prize-winning journalist covering breaking business stories for NBCNews.com.
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