Grubhub to Pay $25 Million to Settle Lawsuit Over Alleged Unlawful Practices
FTC and Illinois Attorney General File Lawsuit Against Grubhub
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.
Complaint Alleges 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.
Company’s Practices
Grubhub would often list unaffiliated restaurants on its platform to drive growth. However, diners would often have to pay more in delivery fees from those restaurants, which damaged their reputations. The company would also often avoid removing unaffiliated restaurants off the platform when requested, instead trying to sell them paid partnerships.
Settlement Terms
As part of the settlement, Grubhub will:
- Stop adding surprise fees 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 and Consumer Frustration
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.
Company 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 "While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward."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. The company will instead pay $25 million, nearly all of which will be used to refund consumers harmed by the company’s conduct.
Frequently Asked Questions
Q: What are the allegations against Grubhub?
A: The FTC and Illinois Attorney General alleged that Grubhub engaged in deceptive practices, including deceiving diners about delivery costs, blocking access to their accounts, and deceiving workers about their earnings.
Q: What are the settlement terms?
A: Grubhub will stop adding surprise fees, stop listing unaffiliated restaurants, be more transparent about driver earnings, notify customers if their account is blocked, and provide simple methods to cancel memberships.
Q: Why is the settlement partially suspended?
A: The settlement is partially suspended because Grubhub is unable to pay the full amount of $140 million. The company will instead pay $25 million, which will be used to refund consumers harmed by its conduct.
