US-based food delivery service Grubhub has agreed to a $25m settlement with the US Federal Trade Commission (FTC) and Illinois Attorney General Kwame Raoul over deceptive practices.
The agreement resolves allegations that the company misled customers regarding order fees, added restaurants to its platform without consent and misrepresented driver pay.
Grubhub will make the payment and implement changes to its platform.
The changes aim to clarify fees charged to diners, accurately advertise earnings potential for delivery partners and improve communication about Grubhub+.
The initial judgement sought by the agencies was $140m but this was reduced based on Grubhub's ability to pay.
Should Grubhub be found to have misrepresented its financial position, the full penalty will be enforced.
FTC chair Lina Khan stated: “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.
“The action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25m for the people cheated by Grubhub’s tactics. There is no ‘gig platform’ exemption to the laws on the books.”
The FTC highlighted deceptive advertising, particularly in Chicago and New York, where driver earnings were overstated.
In a media statement, Grubhub said: “While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.”
Under the proposed settlement awaiting federal court approval, Grubhub must disclose the true cost of delivery, eliminate unjustified fees and ensure restaurant partnerships are consensual.
Any claims regarding driver earnings must be substantiated with evidence.
The complaint and proposed settlement were filed in the Northern District of Illinois court, with finalisation pending court approval.
