FTC and Illinois Attorney General Team Up to Hold Grubhub Accountable for Deceptive Practices

Grubhub will pay $25 million to settle charges brought by the Federal Trade Commission (FTC) and the Illinois Attorney General, following claims of unfair practices that impacted diners, delivery drivers, and small businesses. The settlement addresses a series of deceptive actions by the food delivery giant, from hiding the true cost of delivery to making misleading claims about earnings for drivers.

The investigation, which has been ongoing for years, uncovered a range of deceptive actions. Grubhub allegedly misled diners by advertising delivery services with low upfront costs, only to add hidden “junk fees” later. This was called a “pricing shell game” by one former executive. Not only did this leave customers with hefty bills, but it also eroded trust in the platform.

The company also reportedly tricked delivery drivers by advertising earnings that were far higher than what drivers actually made in practice. Ads promised up to $40/hour in some areas, but the reality was far less, with the average driver earning around $10-11/hour.

Perhaps most troubling were Grubhub’s actions regarding restaurants. Since 2019, Grubhub listed as many as 325,000 unaffiliated restaurants on its platform without permission. This led to significant harm for these businesses, as customers would mistakenly order through Grubhub, often leading to delivery problems, late food, and, ultimately, customers blaming the restaurant for Grubhub’s mistakes.

The Impact on Consumers & Restaurants

‍The deceptive practices not only harmed consumers, who were hit with surprise charges and blocked accounts, but also caused significant damage to restaurants that were either falsely listed on the platform or couldn’t get paid for orders.

Grubhub also made it difficult for consumers to get their money back if their accounts were locked, often without warning. And for those who tried to cancel their Grubhub+ subscriptions, the process was intentionally difficult, leading to countless complaints.

In response to these practices, Grubhub has agreed to a major overhaul of its operations. The company will now have to:

• Clearly disclose delivery costs upfront and stop sneaking in hidden fees.
• Notify customers if their accounts are blocked and provide an easy way to challenge those decisions.
• Make it simple for Grubhub+ members to cancel their subscriptions.
• Remove unaffiliated restaurants from the platform and only feature those that have agreed to be listed.
• Make sure that any claims about driver earnings are realistic and backed up with evidence.

As part of the settlement, Grubhub will pay $25 million, which will primarily go towards compensating consumers who were harmed by these practices. Additionally, the company faces a potential $140 million judgment, though this is largely suspended unless Grubhub is found to have misrepresented its financial situation.

Accountability & Change

‍FTC Chair Lina M. Khan emphasized that this settlement should send a clear message, “There is no ‘gig platform’ exemption to the laws on the books. Grubhub's actions were deceptive and harmful, and now they must face the consequences.”

Illinois Attorney General Kwame Raoul echoed this sentiment, noting that the settlement is a result of close collaboration between his office and the FTC, “We remain committed to holding businesses accountable for deceptive practices, and this settlement is a win for consumers across the country.”

With this settlement, Grubhub will have to change the way it operates to ensure that diners, drivers, and restaurants can trust the platform again.

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