Grubhub, a popular app-based food delivery service, has agreed to pay $25 million to settle a lawsuit with the Federal Trade Commission and Illinois Attorney General Kwame Raoul over alleged unlawful practices. The complaint alleges that Grubhub deceived diners about delivery costs, blocked access to their accounts, deceived workers about their earnings, and listed unaffiliated restaurants on its platform without permission.
According to the FTC Chair Lina Khan, Grubhub's actions harmed diners, workers, and small businesses in an effort to drive growth and increase scale. The company had as many as 325,000 unaffiliated restaurants on its platform, leading to higher delivery fees for diners and damage to the reputations of these restaurants.
As part of the settlement, Grubhub has agreed to stop adding surprise fees, stop listing unaffiliated restaurants on the platform, be more transparent about driver earnings, and provide clearer methods for customers to cancel memberships. The company has also denied many of the allegations made by the FTC, stating that settling the matter is in the best interest of Grubhub moving forward.
Rising prices among third-party food delivery services have been a source of frustration for consumers, with higher yearly increases in total checks reported on third-party apps compared to orders directly from restaurant sites. The FTC complaint alleges that Grubhub added on junk fees to delivery costs, despite advertising a single, low-cost amount for their services.
While the settlement includes a monetary judgment of $140 million, Grubhub will only pay $25 million, with the majority going towards refunding consumers harmed by the company's conduct. If Grubhub is found to have misrepresented its financial status, the full judgment would become immediately due. The company believes the FTC agreed to suspend a portion of the judgment due to good faith negotiations and providing extensive details about their business and financial performance.