Grubhub has agreed to pay $25 million to settle a Federal Trade Commission lawsuit that claimed the food delivery service misled customers and drivers while also damaging the reputation of restaurants. The proposed settlement will require Grubhub to make several changes to the platform, such as showing the total delivery cost when customers place an order.
Along with advertising “highly inflated hourly pay rates for drivers,” the FTC’s initial complaint accused Grubhub of hiding “the true cost of its services” by adding delivery fees that raised the price of customers’ final orders. The agency claimed that starting around 2019, Grubhub began advertising lower delivery fees to attract more customers but then began tacking on a “service” fee that increased the cost of orders anyway.
The FTC also alleged the company charged Grubhub Plus members for delivery despite advertising the subscription as having “free” or “$0” deliveries. The agency claimed Grubhub makes the plan easy to sign up for but difficult to cancel while also allegedly blocking the accounts of users with large gift card balances.
Screenshot: FTCThe FTC claimed Grubhub charged customers hidden fees, raising their total order price.
Additionally, the FTC accused Grubhub of adding restaurants to the platform even if they never signed up to sell food on the service. “Grubhub has had as many as 325,000 unaffiliated restaurants on its platform — more than half of all of the available restaurants on Grubhub,” the FTC claims. As a result, many customers wound up having issues with their orders, resulting in bad feedback for unaffiliated restaurants.
Grubhub is now required to show customers the full cost of delivery and can no longer add “junk fees” to orders. It’s also banned from listing unaffiliated restaurants on the platform, and can only make driver earnings claims “that it can back up with evidence and in writing.” Grubhub must also notify customers when they’re banned and offer a way to appeal the decision, as well as make it easier to cancel Grubhub Plus.
“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward,” Grubhub spokesperson Najy Kamal said in a statement to The Verge. The company also responded to the settlement in a post on its website.
Though Grubhub was initially ordered to pay $140 million, it is “partially suspended based on the company’s inability to pay the full amount.” The company’s $25 million will go toward refunding affected customers, but the FTC says the full judgment will be due “immediately” if Grubhub “is found to have misrepresented its financial status.”
