Grubhub pays millions for lying about costs, restaurants

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Food delivery giant Grubhub has agreed to pay $25 million to settle federal charges following an investigation that uncovered deceptive practices involving customer costs, driver earnings, and unauthorized restaurant listings.

The Federal Trade Commission’s settlement requires Grubhub to implement significant operational changes across multiple aspects of its business. These modifications include providing transparent delivery cost information to consumers, accurate driver compensation advertising, and obtaining explicit restaurant consent before listing establishments on their platform.

Grubhub to pay $25 million settlement after FTC investigation finds ‘unlawful practices’. The Federal Trade Commission’s investigation into the third-party delivery company found that Grubhub deceived diners, delivery drivers, and restaurants https://t.co/wBZBFCaEVd pic.twitter.com/ChTRgKodOO

— Restaurant News (@NRNonline) December 18, 2024

While Grubhub officials strongly rejected the FTC’s allegations, they agreed to pay the settlement amount to resolve the matter. The Chicago-based company committed to enhancing their platform’s transparency regarding fee structures, delivery partner earnings potential, and Grubhub+ membership details.

According to the FTC’s findings, since at least 2019, Grubhub had been adding restaurants to its platform without their knowledge or consent. This strategy was reportedly employed to boost the company’s growth by creating the impression of wider restaurant availability, which typically attracts more users to the platform.

This unauthorized practice resulted in increased costs for customers and negative consequences for restaurants. The affected establishments faced reputation damage and revenue losses, often being blamed for Grubhub’s service failures. When restaurants attempted to remove themselves from the platform, Grubhub representatives allegedly tried to convert them into paying partners and only removed listings after legal threats.

FTC Chair Lina Khan stated that Grubhub employed these deceptive tactics “all in order to drive scale and accelerate growth,” adding that “There is no ‘gig platform’ exemption to the laws on the books.”

So the FTC just settled with Grubhub because the delivery app has been stealing from restaurants, consumers and workers for years. It's been a problem since the pandemic. pic.twitter.com/6jiKVLqXWB

— Matt Stoller (@matthewstoller) December 18, 2024

Although the initial judgment was set at $140 million, it was reduced to $25 million due to the company’s financial limitations. The FTC plans to use the majority of this amount to compensate consumers affected by Grubhub’s practices.

Grubhub issued a statement suggesting that the reduced settlement amount reflected their good-faith negotiations and transparent disclosure of business and financial information to the FTC.

Illinois Attorney General Kwame Raoul noted in a statement shared by the FTC that the settlement represented the “culmination of a multi-year investigation into deceptive and illegal business practices.”