Food delivery services are a great convenience for a lot of people, but it comes at a cost. It’s a third party middle man between you and the restaurant you’re ordering from, and the companies make sure they get a huge cut by adding fees and jacking up prices.
Grubhub, one of the most prolific third-party delivery companies, was just raked over the coals by the Federal Trade Commission in a lawsuit for misleading customers about the cost of delivery, among other shady business practices. Here’s what happened.
What’s the Grubhub Lawsuit All About?
The FTC and the Illinois Attorney General sued Grubhub for deceptive advertising and harming customers, gig workers, and small businesses. The company purposely misrepresented delivery fees in order to look better against the competition like Uber Eats and DoorDash. Grubhub ultimately agreed to settle the lawsuit.
How Did Grubhub Mislead Customers?
According to the lawsuit, Grubhub would advertise one delivery price, but then slip in other junk fees that were “delivery fees in disguise” right before the customer agreed to pay. That often resulted in the customer paying twice as much as advertised.
The lawsuit also took aim at the Grubhub+ subscription service. The company promised free delivery with the service, but still tacked on bogus delivery fees anyway. Plus, Grubhub made it overly difficult for customers to cancel their Grubhub+ subscription, in hopes that they’d give up and keep paying the fee.
What About Restaurants and Grubhub Drivers?
Grubhub didn’t only mislead customers, according to the FTC. It often listed restaurants on its platform without the owner’s knowledge or consent. When things with the delivery went wrong, customers often blamed the restaurant, even though it had nothing to do with the delivery. When restaurants asked to be removed from the platform, the company made it difficult.
As for delivery drivers, Grubhub told prospective gig workers that they’d make much more money than they usually did. In some cases, they were told $26 per hour, but in reality only the top 2% of Grubhub drivers make that much.
How Much Does Grubhub Have to Pay?
Originally, Grubhub was ordered to pay $140 million, which would have been one of the largest penalties against a food delivery service. However, Grubhub said it was unable to pay the full amount, so it was reduced to $25 million. Nearly all of that will be used to refund customers, according to the FTC.
Will This Change Anything?
While convenient, these third-party delivery companies are a blight on the restaurant scene. They skim money from everyone: customers, delivery people, and restaurants. As part of this settlement, the FTC is ordering Grubhub to clean up its act, including ditching the junk fees, make canceling subscriptions easier, stop listing unaffiliated restaurants on the platform, and stop misleading drivers on earnings.
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