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 accused the food delivery platform of engaging in deceptive practices that harmed diners, workers, and small businesses.
The FTC alleged that Grubhub misled diners about delivery costs, blocked customer access to accounts, and falsely advertised earnings to its drivers. Additionally, the platform listed restaurants without their consent to drive growth, which often resulted in higher fees for diners and damaged the reputation of unaffiliated restaurants.
The FTC Chair, Lina Khan, stated that their investigation revealed that Grubhub deceived its customers and drivers while unfairly impacting the reputation and earnings of non-partner restaurants to achieve scale and rapid growth.
Deceptive Practices Harmed Diners and Restaurants
Grubhub reportedly listed over 325,000 unaffiliated restaurants on its platform, accounting for more than half of the restaurants available. The platform allegedly added these restaurants without permission, often charging diners higher delivery fees when ordering from them. This practice not only harmed diners but also negatively affected the reputation of these restaurants.
According to the complaint, when unaffiliated restaurants requested removal from the platform, Grubhub often delayed the process or attempted to sell them paid partnerships instead.
The FTC also claimed that Grubhub added hidden fees to orders. These fees, labeled as service fees or small order fees, were added despite claims that diners would pay a single, low-cost amount for delivery services.
Settlement and Changes to Business Practices
As part of the settlement, Grubhub has agreed to make several changes to its business practices. The company will no longer add surprise fees, list unaffiliated restaurants on its platform, or mislead drivers about potential earnings. Additionally, Grubhub must notify customers if their accounts are blocked and simplify the process for canceling memberships.
The settlement includes a monetary judgment of $140 million, but Grubhub will only pay $25 million due to its inability to pay the full amount. Most of the settlement amount will be used to refund consumers who were harmed by the company’s practices. However, if Grubhub is found to have misrepresented its financial status, the full judgment will become immediately due.
Grubhub acknowledged the settlement and stated that the agreement allows the company to move forward. While the company denied many of the allegations, it emphasized its commitment to transparency and stated that monetary judgments should not cause undue harm to businesses.
Rising Costs in Third-Party Delivery Services
The case highlights ongoing frustrations among consumers regarding rising fees associated with third-party delivery services. Reports indicate that between 2022 and 2024, Americans experienced higher yearly increases in total costs when ordering through delivery platforms compared to ordering directly from restaurants.
The FTC’s action against Grubhub is part of a broader effort to address deceptive practices in the food delivery industry and protect consumers from hidden fees and unfair business tactics.
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