Grubhub to Pay $25 Million to Settle Lawsuit Over Unlawful Practices
Grubhub will pay $25 million to settle a lawsuit from the Federal Trade Commission and Illinois Attorney General Kwame Raoul over allegedly unlawful practices that harmed diners, workers, and small businesses, the FTC announced on Tuesday.
The Complaint
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.
Deceptive Practices
According to the complaint, 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.
Impact on Diners and Restaurants
The company’s alleged practices harmed diners by making them pay more in delivery fees, which in turn damaged the reputations of restaurants that did not partner with Grubhub. Grubhub also listed unaffiliated restaurants on its platform, which often had to pay more in delivery fees, further damaging their reputations.
Settlement Terms
As part of the settlement, Grubhub will stop adding surprise fees, stop listing unaffiliated restaurants on the platform, be more transparent about driver earnings, notify customers if their account has been blocked, and provide more simple methods to cancel memberships.
Rising Prices in Food Delivery
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.
Conclusion
The settlement marks a significant victory for consumers and small businesses, who will receive refunds and protections from Grubhub’s alleged unlawful practices. The FTC’s action serves as a reminder to companies to prioritize transparency and fairness in their business practices.
FAQs
Q: What did Grubhub allegedly do wrong?
A: Grubhub allegedly deceived diners about delivery costs, blocked their access to their accounts, and listed restaurants on its platform without their permission.
Q: What will Grubhub do to correct its practices?
A: As part of the settlement, Grubhub will stop adding surprise fees, stop listing unaffiliated restaurants on the platform, be more transparent about driver earnings, notify customers if their account has been blocked, and provide more simple methods to cancel memberships.
Q: How much will Grubhub pay in the settlement?
A: Grubhub will pay $25 million, nearly all of which will be used to refund consumers harmed by the company’s conduct.
Q: Why did the FTC agree to suspend a portion of the judgment?
A: The FTC agreed to suspend a portion of the judgment because Grubhub negotiated with them in good faith and provided extensive details about its business and financial performance. Monetary judgments are not intended to cause irreparable harm or undue hardship for companies.
