Grubhub Hit With $25M Penalty for Deceiving Diners, Drivers, and Restaurants

Grubhub is paying $25 million in a settlement related to various alleged nefarious actions meant to increase profit. The popular food app allegedly misrepresented its order fees, misled drivers about pay, and added restaurants to the platform without permission.

According to a lawsuit filed by the U.S. Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul, Grubhub was adding surprise “service fees” to customer orders at the last minute. In addition, the platform purportedly falsely claimed delivery fees could be avoided by being a Grubhub+ subscriber but charged the fees anyway.

“Our investigation found that Grubhub tricked its customers, deceived its drivers, and unfairly damaged the reputation and revenues of restaurants that did not partner with Grubhub — all in order to drive scale and accelerate growth,” said FTC Chair Lina M. Khan in the press release. 

Grubhub Has Reportedly Been Doing This for Years

Grubhub apparently deceived drivers by stating they could earn up to $26 per hour in Chicago and up to $40 per hour in New York, for example. Yet, only a very small percentage of freelancers manage to achieve those high rates. The FTC reportedly warned the delivery company about the misleading earnings claims in 2021, but it continued to advertise the rates, nonetheless.

The FTC and attorney general also believe Grubhub added 325,000 unaffiliated eateries to the platform over the last five years. The result was numerous menu discrepancies, delivery problems, and customer complaints. Delivery delays were common as the unaffiliated establishments were not integrated into the company’s ordering system, and drivers had to place a food order themselves. The restaurants purportedly suffered lost revenue and damaged reputations through the delivery company’s actions.

“For Grubhub, these misrepresentations are a quick and cheap way to add restaurant offerings and build scale. But Grubhub’s deception harms restaurants and diners alike,” stated the government agencies, per Reuters.

The regulators also noted that Grubhub allegedly prevented diners with large gift card balances from using the funds. Essentially, the app denied access to the gift cards without any means to recover the money. Complaining customers were purportedly told the account was blocked and could not be reversed. The agencies’ investigation found that 97% of blocked accounts were never unlocked.

Originally, the FTC and Illinois attorney general’s office were asking for a $140 million judgment but reduced it to $25 million based on Grubhub’s ability to pay. However, the initial judgment could be ordered should it be revealed that the company was untruthful about its financial status. The agreement also orders the delivery service to immediately cease the illicit practices and provide clear costs for delivery without including any last-minute junk fees.

The food delivery service’s settlement agreement comes shortly after Grubhub was sold to Wonder Group Inc. last month by Just Eat Takeaway.com in a deal worth $650 million