Food delivery giant Grubhub has agreed to pay $25 million to settle Federal Trade Commission (FTC) charges of misleading customers, drivers, and restaurants through various deceptive practices.
The settlement addresses multiple allegations against the company, including hiding true delivery costs from customers, falsely advertising driver earnings, and listing restaurants without their permission.
According to the FTC's complaint, Grubhub advertised low delivery fees but then added hidden "service" fees that substantially increased final order costs. The company also promoted "free" or "$0" deliveries for Grubhub Plus subscribers while still charging them delivery fees.
In a particularly concerning practice, the FTC found that over half of restaurants on Grubhub's platform - approximately 325,000 establishments - were listed without their consent. This resulted in order problems that damaged restaurants' reputations and led to customer complaints.
The commission also cited Grubhub's misleading recruitment of drivers by advertising unrealistic earnings. In New York, for example, the company promoted potential earnings of up to $40 per hour when the actual median pay was around $10, with only 0.1% of drivers achieving the advertised rate.
While the original judgment was $140 million, it was reduced to $25 million based on Grubhub's declared financial status. The settlement money will go toward refunding affected customers.
Under the settlement terms, Grubhub must now:
- Display total delivery costs upfront
- Stop adding unauthorized restaurants
- Provide evidence for driver earnings claims
- Make subscription cancellations easier
- Create an appeals process for banned accounts
Grubhub spokesperson Najy Kamal denied the allegations but stated settling was "in the best interest of Grubhub." The FTC maintains that the full $140 million will become due if the company is found to have misrepresented its finances.