Food delivery firm Grubhub Inc. agreed to a major legal settlement and will pay $25 million over allegations that it duped consumers, misinformed them about delivery costs, and lied to the drivers.
The settlement resolves an investigation led by the Federal Trade Commission and Attorney General Kwame Raoul’s office that found the popular food delivery platform had misled customers, harming consumers and drivers in many aspects of its business.
Deceptive Practices Against Consumers
The heart of the settlement centers around Grubhub’s failure to disclose accurate pricing and fees. Customers using the platform were allegedly misled about the true cost of their orders.
The lawsuit claimed that Grubhub added extra fees to deliveries, often without clear or sufficient notification to the consumer. In some instances, these fees were not disclosed until the consumer had already placed their order, making it difficult for them to avoid or contest the charges.
Grubhub’s actions tricked customers into paying far more than they expected,” said Illinois Attorney General Kwame Raoul.
“The deceptive pricing practices the company employed undermined the trust consumers place in such platforms, and we are holding them accountable.
Beyond that, the lack of transparency in the business model has allegedly kept many customers in the dark about whether or not delivery fees go directly to the drivers or to Grubhub itself.
Impacts on Drivers and Restaurants
Grubhub also settled claims by drivers who alleged the company had been misrepresenting its pay structures to drivers. It was accused of promising drivers more money and bonuses that were not delivered as advertised.
Drivers said their actual compensation was diminished by hidden fees and changes to how the app’s algorithms were structured, reducing earnings below what was expected.
But restaurant owners have also not been spared, accused of placing their businesses on the Grubhub platform without consent and charging them a lot in commission.
There are arguments over unauthorized promotions that are blamed for many restaurant owners accusing Grubhub of an absence of transparency in their business operations.
Settlement Details
Grubhub would pay $25 million in restitution to affected customers and drivers, according to the settlement. The settlement amount is intended to provide restitution to those who were deceived by the company’s practices.
Additionally, the company agreed to modify its policies to include clear and transparent pricing, disclosure of delivery fees, and clarity on compensation for drivers. Grubhub also must institute a clearer process for obtaining permission from restaurants before listing them on the site.
The settlement is a step toward repairing the damage wrought by Grubhub’s misleading practices, but it also comes at a time when food delivery services are attracting increasing scrutiny from regulators.
The case sends a warning to other companies in the gig economy that clear, honest communication with consumers, workers, and businesses is of paramount importance.
A Broader Issue for the Gig Economy
This case has attracted more scrutiny against the food delivery industry regarding its interaction with its customers and personnel, especially in ensuring that such interaction is not exploitative of the complicated relationships riding these businesses.
As this lawsuit works toward a potential settlement, the food delivery industry itself is under greater scrutiny to improve communications with both customers and workers, so that they do not exploit the often-complex relationships these businesses rely upon.
In Conclusion
While the $25 million settlement might help put a dent in restitution for aggrieved consumers and drivers, the company’s attempt to restore itself to profitability will depend upon how well it can erase the blemish off its reputation and earn back consumer trust.
Other gig economy platforms, too, can now rethink their approaches to ensure they operate fairly and transparently.
“We hope this settlement brings some measure of relief to the many people who have been victimized by Grubhub’s sleazy practices,” one consumer rights advocate said. “It also sets a precedent for other companies to take heed: be transparent, be honest, and put the customer first.”
