By Jody Godoy
(Reuters) -Grubhub settled with the U.S. Federal Trade Commission and Illinois Attorney General Kwame Raoul on Tuesday for allegedly misleading customers about order fees, adding restaurants to its platform without their consent and deceiving drivers about pay.
The settlement requires Grubhub to cease the practices and pay $25 million. The agencies sought a $140 million judgment against the company, but reduced it to what Grubhub is able to pay, they said. If Grubhub is found to have misrepresented its financial position, the full penalty will apply.
A Grubhub spokesperson said on Tuesday that, “while we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.”
The food delivery platform hid fees until the last minute, misled Grubhub+ subscribers to believe they can avoid fees, and blocked some customers from using their gift card balances, according to the lawsuit.
Drivers were told they could earn up to $26 an hour, when in reality only the top 2% achieved those rates, the agencies said. And thousands of restaurants were added to the platform without their consent, resulting in order delays and customer complaints, the FTC and Illinois said.
“For Grubhub, these misrepresentations are a quick and cheap way to add restaurant offerings and build scale. But Grubhub’s deception harms restaurants and diners alike,” the agencies said.
The FTC and Illinois alleged the practices violated federal and state law.
(Reporting by Jody Godoy in New York; Edited by Chizu Nomiyama)
