Posted: 12:22 PM PST · December 17, 2024
The Settlement Agreement
Grubhub has agreed to pay $25 million to settle a lawsuit filed by the Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul. The lawsuit alleges that Grubhub engaged in unlawful practices, including misleading customers about delivery costs, deceiving drivers about potential earnings, and listing restaurants on its platform without their permission.
The Allegations
The agencies claim that Grubhub hid the true cost of its delivery services, resulting in a final price that was often double what was originally advertised due to ‘service fees’ or ‘small order fees.’ They also claim that Grubhub’s ads inflated hourly pay rates well above what drivers would realistically earn.
- Misleading Customers: The FTC alleges that Grubhub misled customers by charging them more than they expected for delivery. This was done through the use of "service fees" and "small order fees," which were not clearly disclosed to customers.
- Deceiving Drivers: The agencies claim that Grubhub deceived drivers about their potential earnings. They allege that Grubhub’s ads promised higher pay rates than what drivers would actually earn, leading to financial losses for drivers.
- Listing Restaurants Without Permission: The FTC alleges that Grubhub listed restaurants on its platform without their permission. This resulted in significant harm to both the unaffiliated restaurants and customers.
The Proposed Settlement
Under the proposed settlement, Grubhub is required to stop these practices. The company has agreed to:
- Stop Misleading Customers: Grubhub must clearly disclose all fees associated with delivery.
- Stop Deceiving Drivers: Grubhub must accurately advertise drivers’ potential earnings.
- Remove Unauthorized Restaurant Listings: Grubhub must remove restaurants that are listed on its platform without their permission.
Grubhub’s Response
In a statement, Grubhub said: "While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward."
Industry Reaction
The settlement has sparked a mixed reaction from industry experts. Some have praised Grubhub for taking responsibility for its actions, while others have criticized the company for engaging in deceptive practices.
- Support: "This settlement is a positive step towards holding companies accountable for their actions," said one expert.
- Criticism: "Grubhub’s behavior was unacceptable, and this settlement does not go far enough to address the harm caused to customers and drivers," said another expert.
Conclusion
The proposed settlement requires Grubhub to stop its deceptive practices and pay $25 million in damages. While some have praised the company for taking responsibility, others have criticized it for engaging in unlawful behavior. The industry is still reeling from the news, and only time will tell if this settlement marks a turning point for Grubhub.
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