An app-based delivery driver waits outside a restaurant that uses app delivery on July 7, 2023, in New York City.
Spencer Pratt | Getty Images
Grubhub will pay $25 million to settle a lawsuit from the Federal Trade Commission and Illinois Attorney General Kwame Raoul over alleged illegal practices that harmed diners, workers and small businesses, the FTC announced Tuesday.
complaint claim Grubhub deceived diners about delivery fees and blocked them from accessing their accounts. The company also deceived workers about how much they could earn delivering food and listed restaurants on its platform without workers’ permission.
“Our investigation found that Grubhub deceived customers, defrauded drivers, and unfairly harmed the reputation and revenue of restaurants that did not partner with Grubhub, all in an effort to expand Scale and accelerate growth.
The complaint alleges that there are as many as 325,000 unaffiliated restaurants on the Grubhub platform, accounting for more than half of all restaurants available on Grubhub. The company purportedly listed unaffiliated restaurants to drive growth, but diners often had to pay these restaurants more for delivery, which in turn hurt their reputations.
The complaint also alleges that Grubhub often avoids removing non-affiliated restaurants from the platform when requested and instead attempts to sell them paid partnerships.
As part of the settlement, the food delivery company will stop adding unexpected fees often labeled “service fees” or “small order fees,” stop listing non-affiliated restaurants on the platform, increase transparency about driver earnings, and notify customer accounts has been blocked and provides an easier way to cancel your membership.
Prices for third-party food delivery services rise continues to be frustrating Americans want to reduce extra costs. According to the survey, between 2022 and 2024, the total amount consumers pay on third-party apps will increase at a higher annual rate than orders placed directly through restaurant websites Technology and economy.
The FTC complaint alleges that Grubhub adds junk fees, often labeled “service fees” or “small order fees,” to delivery costs, even though its advertising claims that diners will be charged for Grubhub’s delivery-related services Pay a low-cost fee.
“At Grubhub, we are committed to transparency so that every 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 FTC’s claims, “
The settlement includes a $140 million monetary judgment, but has been partially suspended due to Grubhub’s inability to pay in full, according to the release. The company will pay $25 million, almost entirely to refund consumers harmed by its actions. If Grubhub is found to have misrepresented its financial position, a full judgment will be issued immediately, according to the release.
“We believe the FTC agreed to stay some of the judgment because we negotiated with them in good faith and provided detailed information about our business and financial performance,” a Grubhub spokesperson said. “The monetary judgment was not intended to cause irreparable harm to the company or Undue hardship.”
