Grubhub agrees to US$25M settlement over deceptive practices allegation

USA – Food delivery platform Grubhub has settled for US$25 million with the US Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul over allegations of deceptive practices.

Grubhub has agreed to pay US$25 million and make platform modifications to settle allegations of misleading customers about order fees, adding restaurants without consent, and misrepresenting driver pay.

The Federal Trade Commission (FTC) alleged that the company engaged in deceptive practices to inflate its scale and growth, resulting in harm to consumers, drivers, and non-partnered restaurants.

FTC Chair Lina Khan stated that the action holds Grubhub accountable for tricking customers, deceiving drivers, and unfairly impacting the revenues and reputations of restaurants that did not partner with the platform.

Khan emphasized that the settlement ensures compliance with laws governing fair trade practices, securing nearly US$25 million for affected individuals.

The initial penalty sought was US$140 million, but this was reduced based on Grubhub’s reported financial position. If the company is found to have misrepresented its ability to pay, the full penalty will be enforced.

The settlement requires Grubhub to disclose the true cost of delivery, eliminate unjustified fees, and ensure all restaurant partnerships are consensual. Claims about driver earnings must now be substantiated with evidence.

The changes also include clarifying fees charged to diners, accurately advertising delivery partner earnings, and improving communication about its subscription service, Grubhub+.

The proposed agreement is pending approval by the Northern District of Illinois federal court.

Grubhub, while denying many of the FTC’s allegations, stated that settling the matter is in its best interest to allow the company to move forward.

The FTC highlighted specific instances of deceptive advertising, particularly in Chicago and New York, where driver earnings were overstated.

The resolution comes at a critical time for Grubhub, which is expanding its activities and partnerships.

On December 14, the platform announced an expanded partnership with Hilton Hotels, extending its delivery services to over 2,600 properties across brands like Hampton, Tru, and Spark.

This builds on a 2023 collaboration that included 500 Homewood Suites and Home2Suites locations.

Grubhub’s growing presence in the hotel sector also includes partnerships with Sonesta, My Place Hotels of America, and Choice Hotels International, enhancing guest amenities while boosting the company’s visibility in the U.S. food delivery market, where it holds the third-largest market share.

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