Grubhub to pay $25 million in FTC settlement over harmful practices against diners and workers.

• The FTC announced on Tuesday that Grubhub will pay $25 million to settle a lawsuit over alleged unlawful practices that harmed diners, workers, and small businesses.
• The allegation is that Grubhub misled customers regarding delivery fees and restricted their access to accounts.
• The persistent increase in fees charged by third-party food delivery services remains a source of frustration for Americans seeking cost-effective options.

On Tuesday, the Federal Trade Commission and Illinois Attorney General Kwame Raoul announced that Grubhub will pay $25 million to settle a lawsuit over alleged unlawful practices that harmed diners, workers, and small businesses.

Grubhub allegedly misled diners about delivery fees and restricted their access to accounts, while also deceiving workers about earnings and listing restaurants without their consent on its platform.

Lina Khan, FTC Chair, stated in a press release that Grubhub misled its customers, drivers, and restaurants, resulting in harm to their reputations and revenues, in order to increase its customer base and speed up growth.

Grubhub has more than half of all available restaurants on its platform, which are unaffiliated, according to the complaint. The company allegedly listed these restaurants to drive growth, but diners often had to pay more in delivery fees from these restaurants, damaging their reputations.

Grubhub was accused of not removing unaffiliated restaurants from its platform when requested and instead attempted to sell them paid partnerships, according to the complaint.

The food delivery company will cease charging surprise fees, stop featuring unrelated restaurants, enhance transparency regarding driver wages, inform customers of account suspensions, and simplify the process for canceling memberships as part of the settlement agreement.

Consumers have been frustrated by the ongoing rise in prices among third-party food delivery services, with yearly increases in their total checks on third-party apps being higher than orders made directly through restaurant sites between 2022 and 2024, according to Technomic.

Grubhub was accused of charging diners extra fees for delivery services, which were advertised as a single, low-cost amount, but were actually added to the delivery cost.

"Grubhub is dedicated to transparency, ensuring that diners, restaurants, and drivers can make informed decisions when doing business with us. Although we categorically deny the allegations made by the FTC, many of which are incorrect, misleading, or no longer relevant to our business, we believe it is in our best interest to settle this matter and move forward."

Grubhub will pay $25 million to settle a lawsuit, but the monetary judgment of $140 million is partially suspended due to the company's inability to pay the full amount. The company will use nearly all of the $25 million to refund consumers who were harmed by its conduct. If Grubhub is found to have misrepresented its financial status, the full judgment will become immediately due, according to the press release.

"The Grubhub spokesperson stated that the FTC agreed to suspend a portion of the judgment because they negotiated in good faith and provided extensive details about their business and financial performance. The spokesperson added that monetary judgments are not intended to cause irreparable harm or undue hardship for companies."