Food delivery platform Grubhub has agreed to pay $25 million to settle charges from the Federal Trade Commission that it engaged in several “unlawful practices.”
The FTC and the Illinois Attorney General charged that Grubhub deceived diners about delivery costs and blocked access to their accounts and funds; deceived workers about how much money they would make delivering food; and unfairly and deceptively listed restaurants on its platform without their permission.
Under the proposed settlement, Grubhub must make substantial changes to its operations, including telling consumers the full cost of delivery, honestly advertising pay for drivers, and listing restaurants on its platform only with their consent.
“Our investigation found 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,” said FTC Chair Lina Khan, in a December 17 release. “Today’s action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25 million for the people cheated by Grubhub’s tactics. There is no ‘gig platform’ exemption to the laws on the books.”
“At Grubhub, we’re committed to transparency so that every single day diners, restaurants and drivers can make well-informed choices to do business with us,” the company said in a December 17 statement.
“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.
“As part of the settlement, Grubhub agreed to pay a suspended judgment of $25 million and will make changes to its platform to make it even easier for diners to understand the fees we charge, how we advertise earnings potential for delivery partners, and how we communicate about Grubhub+, among other updates.”
Delivery costs were a large part of the FTC’s complaint:
The complaint charges that for years, Grubhub has hidden the true cost of its delivery services—a tactic that a former executive called a “pricing shell game.” Grubhub has advertised that diners will pay a single, low-cost amount for Grubhub’s services in connection with a delivery order. In reality, Grubhub tacks on junk fees, resulting in a final price that is often more than double what it originally advertised.
These surprise fees are often labeled as “service fees” or “small order fees,” but they are simply delivery fees in disguise. Indeed, Grubhub described the “service fee,” according to Grubhub company documents cited in the complaint, as “directly tied to the act of delivering (i.e. it is another form of delivery fee).” And for accounting purposes, Grubhub treats the two fees as part of the same delivery fee, explaining that “delivery fee + service fee = the restaurant’s delivery fee.” One internal message from a former executive said this pricing tactic was “misleading, eroding trust,” and “truly more expensive” for consumers.
The deceptive claims extend to Grubhub’s “Grubhub+” subscription service, according to the complaint. Grubhub often advertised its subscription as providing “free” or $0” delivery, but Grubhub still charged subscribers for delivery. In addition, while the signup process for Grubhub+ is simple, Grubhub has put numerous roadblocks in place to impede diners from canceling, leading to many diner complaints.
The settlement includes a monetary judgment of $140 million against Grubhub, which is partially suspended based on the company’s inability to pay the full amount. Grubhub will be required to pay $25 million, nearly all of which will be used to refund consumers harmed by its actions. If Grubhub is found to have misrepresented its financial status, the FTC says the full judgment would become immediately due.
