Grubhub to pay $25M settlement over allegations of deceiving customers, workers

GrubHub settlement overview:

• Who: Grubhub will pay a $25 million settlement to resolve claims in a federal investigation.
• Why: The Federal Trade Commission accused the company of multiple unfair and illegal business practices toward diners, drivers and restaurants.
• Where: The Grubhub settlement was filed in an Illinois federal court.

Grubhub will pay $25 million and overhaul its business practices to resolve allegations from the Federal Trade Commission and the Office of the Illinois Attorney General. 

In a Dec. 16 press release, the FTC said it accused the company of deceiving diners, misleading drivers and harming unaffiliated restaurants in a scheme to grow its platform unfairly.

The FTC’s investigation uncovered that Grubhub hid delivery costs behind so-called “junk fees,” such as “service fees” or “small order fees,” which inflated the final price diners paid, it said.

“Grubhub tricked its customers, deceived its drivers, and unfairly damaged the reputation and revenues of restaurants that did not partner with Grubhub,” FTC Chair Lina M. Khan said in the press release.

Additionally, the company falsely advertised its Grubhub+ subscription as offering free delivery while still charging fees. Grubhub also locked users out of their accounts, withholding access to gift card funds without explanation, the press release says.

Grubhub added fake restaurant listings to its platform to boost listings, FTC says

Since 2019, Grubhub allegedly added unaffiliated restaurants to its platform without their consent to boost its listings. This practice often led to inaccurate menu options, late deliveries, and frustrated diners who mistakenly blamed restaurants, the FTC said. 

Grubhub reportedly ignored complaints from restaurants and even used them to pressure businesses into paid partnerships.

Grubhub also misled drivers about potential earnings, the FTC claimed. Ads claimed pay rates up to $40 per hour in some regions, while the actual median pay was closer to $10 per hour. Despite receiving warnings from the FTC in 2021, Grubhub allegedly continued using inflated earnings claims. 

Illinois Attorney General Kwame Raoul said the allegations came about through a significant investigation. “This settlement is the culmination of a multi-year investigation…resulting in relief for Illinois consumers and accountability for deceptive business practices.”

Under the Grubhub settlement, the company must disclose delivery fees, allow diners to contest blocked accounts, and provide simpler cancellation options for subscriptions. The company is also banned from listing unaffiliated restaurants without consent and must substantiate driver earnings claims.

The $25 million Grubhub settlement will primarily go toward refunding affected consumers. If Grubhub misrepresents its financial status, a suspended $140 million judgment will be reinstated.

“This action holds Grubhub to account,” Khan said.

Meanwhile, in September, the FTC sent out millions in refunds to consumers harmed by questionable business practices and other misconduct. Click here to read more. 

What do you think of this Grubhub settlement? Let us know in the comments. 

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