Grubhub to pay $25 million in FTC settlement over harmful practices against diners, workers

The FTC announced Tuesday that Grubhub will pay $25 million to settle a lawsuit filed by the Federal Trade Commission and Illinois Attorney General Kwame Raoul over alleged illegal practices.

Complaint Claims that Grubhub misled diners about delivery costs and blocked access to their accounts; The company also cheated workers on how much they would earn by delivering food to listed restaurants on its platform without their permission.

FTC Chair Lena Khan said in a press release, “Our investigation found that Grubhub defrauded its customers, defrauded its drivers, and unfairly harmed the reputation and revenue of restaurants that do business with Grubhub. didn’t contribute – all to drive scale and accelerate growth”. .

According to the complaint, Grubhub has 325,000 unaffiliated restaurants on its platform, more than half of all restaurants available on Grubhub. The company reportedly listed unaffiliated restaurants to boost growth, but diners often had to pay higher delivery fees from those restaurants, which, in turn, damaged their reputation.

The complaint further alleges that Grubhub often avoids removing unaffiliated restaurants from the platform when requested, instead trying to sell them paid subscriptions.

As part of the settlement, the food delivery company will stop adding surprise fees, often labeled “service fees” or “small order fees,” to stop listing unaffiliated restaurants on the platform. , be more transparent about driver earnings, notify users if an account has been blocked and provide more convenient ways to cancel membership.

There are rising prices among third-party food delivery services The frustration continued Americans want to reduce surcharges. Between 2022 and 2024, consumers reported an annual increase in their total checks on third-party apps compared to orders placed directly through restaurant sites. technical.

The FTC complaint alleges that Grubhub will add junk fees to delivery costs, often labeled as “service fees” or “small order fees,” despite advertising that dinner deliveries are tied to Pay one, low-cost amount for Grubhub services.

“At Grubhub, we are committed to transparency so that every single day diners, restaurants and drivers can make informed choices about doing 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 false, misleading or no longer applicable to our business, we believe it is in Grubhub’s best interests to settle this matter.” I am and allow us to move forward.”

The settlement includes a $140 million monetary judgment, but is partially suspended because Grubhub is unable to pay the full amount, according to the press release. The company will instead pay $25 million, almost all of which will be used to reimburse customers harmed by the company’s conduct. According to the press release, if Grubhub has misrepresented its financial position, the full judgment will be immediate.

“We believe the FTC agreed to suspend part of the judgment because we communicated with them in good faith and provided extensive details about our business and financial performance,” a Grubhub spokesperson said. “Financial decisions are not intended to cause irreparable harm or unnecessary hardship to companies.”