Grubhub has agreed to pay $25 million to resolve allegations brought by the Federal Trade Commission (FTC) and the Illinois Attorney General. The food delivery company faced accusations of engaging in unlawful practices, including misleading customers about delivery costs, deceiving drivers regarding earnings, and listing restaurants on its platform without their consent.
As part of the proposed settlement, Grubhub is required to implement significant operational changes. These include disclosing the full cost of delivery to consumers, accurately advertising driver pay, and ensuring that restaurants are listed on its platform only with permission.
FTC Chair Lina M. Khan stated, "Our investigation found that Grubhub tricked its customers, deceived its drivers, and unfairly damaged the reputation and revenues of restaurants that did not partner with Grubhub—all in order to drive scale and accelerate growth." She added that the action holds Grubhub accountable for these illegal practices.
Illinois Attorney General Kwame Raoul commented on the outcome: "This settlement is the culmination of a multi-year investigation into deceptive and illegal business practices perpetrated by Grubhub." He expressed gratitude for the partnership with FTC Chair Lina Khan in securing relief for Illinois consumers.
The complaint highlighted several issues with Grubhub's operations since 2019. One significant problem was adding unaffiliated restaurants to its platform without consent, leading to increased fees for diners and complications for restaurants. This practice allegedly provided Grubhub with an unfair competitive advantage by expanding its reach at others' expense.
Additionally, Grubhub was accused of concealing true delivery costs from consumers through misleading pricing tactics labeled as "service fees" or "small order fees." These surprise charges often doubled the initially advertised price. The complaint also addressed problems with the company's subscription service "Grubhub+," which was promoted as offering free delivery but still incurred charges.
For drivers, Grubhub's advertisements were said to overstate potential earnings significantly. Ads claimed high hourly rates far above what most drivers could realistically earn. Despite receiving a Notice of Penalty Offenses from the FTC in 2021 warning against such claims, it is alleged that Grubhub continued this practice.
The proposed settlement includes measures such as providing transparency about account blocks and enabling consumers to appeal decisions quickly. Furthermore, it mandates clear cancellation options for subscriptions like Grubhub+ and requires truthful driver earnings claims backed by evidence.
A monetary judgment of $140 million was issued against Grubhub; however, it is partially suspended due to financial constraints on paying the full amount. The company will pay $25 million primarily intended for consumer refunds affected by these practices.
The FTC filed the complaint and final order in the U.S. District Court for the Northern District of Illinois after a unanimous Commission vote authorizing legal action against Grubhub.
