No "gig platform" exemption from the law, FTC chair says
Grubhub has agreed to pay $25 million to settle charges from the Federal Trade Commission (FTC) and the Illinois Attorney General over unfair business practices.
The company misled consumers about delivery costs, blocked customer accounts without notice, and deceived drivers about their potential earnings. It also listed restaurants on its platform without their permission, harming both the restaurants and diners, the FTC said.
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 Grubhuball in order to drive scale and accelerate growth, said FTC Chair Lina M. Khan.
Todays action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25 million for the people cheated by Grubhubs tactics. There is no gig platform exemption to the laws on the books, Khan said.
Under the settlement, Grubhub must make several changes:
- Clearly disclose the full cost of delivery and stop adding hidden fees.
- Notify consumers when their accounts are blocked and give them a way to appeal.
- Allow easy cancellation of Grubhub+ subscriptions.
- Stop listing unaffiliated restaurants on the platform.
- Ensure earnings claims for drivers are truthful.
Grubhub will also be required to refund consumers harmed by its practices, with the settlement including a $25 million payment.
Fake restaurant affiliations
Since at least 2019, Grubhub has added unaffiliated restaurants to its platform without their permission. The complaint alleges Grubhub did this to drive growththe more restaurants that appeared to be available on a platform, the more likely consumers are to use it.
As the complaint charges, however, that growth happened at the expense of diners, who paid more in fees for these orders and experienced numerous ordering problems, and restaurants, who bore the brunt of diners ire for Grubhubs failures and experienced damaged reputations and lost revenue.
According to the complaint, Grubhub has had as many as 325,000 unaffiliated restaurants on its platformmore than half of all of the available restaurants on Grubhub. This scale, combined with a chaotic ordering system and outdated menus, caused significant harm to the unaffiliated restaurants and diners alike.
First, the complaint notes that when diners searched for these restaurants online, the initial search results would often point to Grubhub, diverting diners from ordering directly from the restaurant and from paying the restaurants directly for delivery.
Second, without any integration with Grubhubs ordering system, these restaurants were bombarded with orders directly from Grubhub drivers, including for food the restaurants did not serve. Moreover, drivers could only pay using Grubhub credit cards that were sometimes declined for insufficient funds. This left restaurants unpaid for food they had already prepared.
When restaurants contacted Grubhub demanding to be removed from the platform, the company would try to sell them paid partnerships instead, and often only removed restaurants after they threatened legal action. The company received numerous complaints from restaurants about these practices. Instead of correcting them, Grubhub made their practices even harder for diners and restaurants to detect, according to the complaint.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-12-17 22:08:23
