Grubhub has agreed to pay $25 million to settle a lawsuit brought by the Federal Trade Commission and Illinois Attorney General Kwame Raoul. The lawsuit alleged that Grubhub engaged in unlawful practices that harmed diners, workers, and small businesses. The FTC announced the settlement on Tuesday.
According to the complaint, Grubhub deceived diners about delivery costs, blocked access to their accounts, misled workers about their earnings, and listed restaurants on its platform without their permission. FTC Chair Lina Khan stated that Grubhub’s actions deceived customers, drivers, and negatively impacted restaurants that did not partner with the company.
The complaint revealed that Grubhub had around 325,000 unaffiliated restaurants on its platform, more than half of all available restaurants. The company allegedly listed these restaurants to drive growth, resulting in higher delivery fees for diners and damaging the restaurants’ reputations.
As part of the settlement, Grubhub will cease adding surprise fees, stop listing unaffiliated restaurants, provide transparent information on driver earnings, notify customers of blocked accounts, and simplify membership cancellation processes.
The rising prices of third-party food delivery services have been a source of frustration for consumers. The FTC complaint accused Grubhub of adding extra fees to delivery costs, despite advertising a single, low-cost amount for its services.
Grubhub, while denying the allegations, agreed to settle the matter in the best interest of the company. The settlement includes a $140 million monetary judgment, with Grubhub paying $25 million to refund affected consumers. If Grubhub misrepresents its financial status, the full judgment would become immediately due.
The company stated that the FTC agreed to suspend a portion of the judgment due to good-faith negotiations and providing detailed business and financial information. Grubhub emphasized that monetary judgments should not cause irreparable harm to companies.
