Grubhub Pays 25 Million To Settle Misleading Advertising Claims

Grubhub Settles FTC Lawsuit with $25 Million Payment, Promises Changes to Platform

The Federal Trade Commission (FTC) alleges that food delivery service Grubhub misled customers and drivers. The proposed settlement aims to address issues related to hidden fees, advertising practices, and platform functionality.

The FTC claims that Grubhub advertised “highly inflated hourly pay rates for drivers” while hiding the true cost of its services by adding delivery fees that raised the price of customers’ final orders. Starting around 2019, Grubhub began offering lower delivery fees to attract more customers but then added a “service” fee that increased the cost of orders anyway.

Grubhub faces criticism for charging customers hidden fees, raising their total order price. As many as 325,000 unaffiliated restaurants were listed on its platform at some point – more than half of all available restaurants.

The settlement requires Grubhub to show customers the full cost of delivery and ban “junk fees” from orders. The company can no longer list unaffiliated restaurants on its platform and must make driver earnings claims that are supported by evidence and written documentation. Furthermore, Grubhub will be required to notify customers when they’re banned from using the service and offer a process for appealing those decisions.

Grubhub has chosen to settle rather than contest the allegations, stating that it believes doing so is in the best interest of the company. While denying many of the allegations, the company acknowledges that settling allows it to move forward. “Many of the allegations made by the FTC are wrong, misleading or no longer applicable to our business,” said Najy Kamal, a spokesperson for the company.

As part of its settlement agreement with the FTC, Grubhub will implement significant changes to its platform, aiming to increase transparency and fairness for both customers and drivers. These modifications hope to rebuild trust with users and restore Grubhub’s reputation as a reliable food delivery option.

The FTC has sent a clear message about its commitment to protecting consumers from deceptive business practices in the digital age. The agency will continue to monitor the platform for compliance, which may impact the lives of customers who have been affected by Grubhub’s alleged wrongdoing.