Grubhub has agreed to pay $25 million to resolve allegations by the Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul.
The food delivery giant faced accusations of deceptive practices that misled diners, shortchanged drivers, and damaged unaffiliated restaurants.
According to the FTC complaint, Grubhub inflated delivery costs with hidden fees and falsely advertised low-cost services.
Drivers were reportedly misled about earnings, while unaffiliated restaurants were added to the platform without consent.
This tactic, aimed at rapid expansion, left some diners paying higher delivery fees, tarnishing restaurant reputations.
FTC Chair Lina Khan stated 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.”
At its peak, Grubhub featured up to 325,000 unaffiliated restaurants, over half its platform listings.
The complaint alleges that when restaurants asked to be removed, Grubhub often tried to convert them into paying partners instead.
The settlement imposes sweeping changes. Grubhub must eliminate hidden fees, stop listing unauthorized restaurants, clarify driver earnings, notify users of account blocks, and simplify membership cancellations.
The FTC aims to curb surprise charges like “service fees” and “small order fees,” often tacked onto bills despite promises of low-cost services.
Rising delivery costs continue to frustrate consumers. A Technomic report shows third-party app users saw steeper check increases from 2022 to 2024 compared to direct restaurant orders, underscoring concerns over fee transparency.
Grubhub maintains it acted in good faith. “While we deny many of the FTC’s claims, we believe this settlement is best for Grubhub and our stakeholders,” said a company spokesperson.
The $140 million judgment was reduced to $25 million, citing financial constraints. Most of the payment will fund refunds for affected customers.
However, should Grubhub misrepresent its finances, the full judgment will be enforced.
This case sheds light on the growing scrutiny of third-party delivery platforms as consumers demand clearer pricing and fairer practices.
Businesses that operate in this space may face increasing pressure to maintain transparency and ethical standards.
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