Grubhub to Pay $25 Million for Harmful Practices Against Diners, Workers
Settlement Reached Over Alleged Unlawful Practices
Grubhub will pay $25 million to settle a lawsuit from the Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul over allegedly unlawful practices that harmed diners, workers, and small businesses, the FTC announced on Tuesday.
Deceptive Practices
The complaint claims that Grubhub deceived diners about delivery costs and blocked their access to their accounts. The company also deceived workers about how much money they would make delivering food and listed restaurants on its platform without their permission.
Investigation Findings
“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,” FTC Chair Lina Khan said in a press release.
Unaffiliated Restaurants
Grubhub has had as many as 325,000 unaffiliated restaurants on its platform — more than half of all of the available restaurants on Grubhub, according to the complaint. The company allegedly listed unaffiliated restaurants in order to drive growth, but diners often had to pay more in delivery fees from those restaurants, which, in turn, damaged their reputations.
Settlement Terms
As part of the settlement, the food delivery company will:
* Stop adding surprise fees that are often labeled as “service fees” or “small order fees”
* Stop listing unaffiliated restaurants on the platform
* Be more transparent about driver earnings
* Notify customers if their account has been blocked
* Provide more simple methods to cancel memberships
Rising Prices
Rising prices among third-party food delivery services have continued to frustrate Americans looking to reduce extra fees. Between 2022 and 2024, consumers reported higher yearly increases in their total checks on third-party apps compared to orders made directly through restaurant sites, according to Technomic.
Junk Fees
The FTC complaint alleged that Grubhub would add on junk fees to delivery costs, often labeled as “service fees” or “small order fees,” despite having advertised that diners would pay a single, low-cost amount for Grubhub’s services tied to deliveries.
Grubhub Response
“At Grubhub, we’re committed to transparency so that every single day diners, restaurants, and drivers can make well-informed choices to do business with us,” a Grubhub spokesperson wrote in a statement to CNBC. “While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.”
Conclusion
The settlement includes a monetary judgment of $140 million, but is partially suspended as Grubhub is unable to pay the full amount, according to the press release. The company will instead pay $25 million, nearly all of which will be used to refund consumers harmed by the company’s conduct.
FAQs
* What is the settlement amount?
+ Grubhub will pay $25 million to settle the lawsuit.
* What are the terms of the settlement?
+ Grubhub will stop adding surprise fees, stop listing unaffiliated restaurants, be more transparent about driver earnings, notify customers if their account has been blocked, and provide more simple methods to cancel memberships.
* What is the reason for the settlement?
+ The settlement is a result of Grubhub’s alleged unlawful practices that harmed diners, workers, and small businesses.
