Grubhub has agreed to pay $25 million to resolve a lawsuit brought by the Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul. The lawsuit accused the food delivery giant of engaging in deceptive practices that negatively impacted diners, drivers, and unaffiliated restaurants. The settlement comes as part of a broader effort by the FTC to address misleading practices in the third-party food delivery industry.
Deceptive practices unveiled
As said in the complaint by the FTC, Grubhub misleads its diners into believing that delivery costs exist while causing workers to believe that they are earning something and listing restaurants on the platform without having their permission. The lawsuit showed that Grubhub listed as many as 325,000 unaffiliated restaurants on its platform, more than half of its total Grubhub’s tactics have ruined reputations and revenues for restaurateurs that have not partnered with the company, and all this through driving the growth of the company, said FTC Chair Lina Khan.
To order from that restaurant, diners had to pay a higher delivery fee, which, in turn, annoyed them and negatively affected the image of those restaurants.
Even when restaurants make requests to have their name removed from that platform, the so-called Grubhub continues in its delay and seeks to spruik a cash-earning partnership instead. The company also hides fees—commonly called “service fees” or “small order fees”—as it advertises cheap delivery while camouflaging the diner. Grubhub employees have also been told of nonexistent earning power relating to their assumed potential earnings via food deliveries. This also adds to the troublesome difficulty that all consumers and workers faced regarding increased fees and ambiguous pricing mechanisms in the food delivery services of third parties.
Settlement and reforms
As part of the settlement, Grubhub has agreed to implement several reforms aimed at addressing its past practices. These changes include:
- Ending the use of surprise fees, such as “service fees” or “small order fees.”
- Stopping the listing of unaffiliated restaurants on its platform.
- Improving transparency about driver earnings.
- Notifying customers when their accounts are blocked.
- Simplifying membership cancellation processes.
Grubhub has also taken on a $25 million settlement, most of which will go towards refunds to consumers affected by this settlement. While the settlement does provide for a larger judgment of $140 million, most of that amount is suspended due to Grubhub’s inability to pay it in full. The FTC also stated that should Grubhub misrepresent its financial state, the full judgment will be immediately due. A Grubhub spokesperson denied many of the FTC’s allegations, calling them outdated or just plain untrue. “We believe that this matter is best resolved, and we can move forward,” said the spokesperson.
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The FTC’s complaint and subsequent settlement say a lot about rising discontent in the food delivery industry. According to industry research house Technomic, consumers reported that between 2022 and 2024, they experienced more increases in the prices of restaurant meals than were reported by those buying through third-party apps.
It says that it continues to make meaningful strides toward improved transparency and fairness across the platform that Grubhub operates. “We want people to have transparency so that they can make informed decisions about working with us,” the company stated.
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In the end, the settlement embodies a great deal for consumers and small businesses who desire to be freed from what they consider unfair practices in the food delivery world. In addition, it marks the FTC’s unyielding approach to making corporations accountable for mere pretension and to setting precedents for greater transparency and fairness across the industry.
