Grubhub has agreed to pay $25 million to settle claims that it violated competition and consumer protection laws. Multiple charges have been brought from the Federal Trade Commission and the Illinois State General, according to an FTC press release on December 17, 2024. The allegations stem from a years-long investigation into Grubhub’s alleged deception of worker’s pay, delivery costs, and listing of restaurants on their website without proprietary permission.
Unauthorized Restaurant Listings Spark FTC Investigation
The settlement claims Grubhub has added unaffiliated restaurants to its platform without their permission since 2019. It further explains that Grubhub did this to expand its growth by claiming it had more restaurants available than it did. The issue with the FTC is that this came at the cost of diners using Grubhub’s service. This fallacy led to increased consumer spending and aggravation from paid subscribers.
Impact on Restaurants: Reputations and Revenue at Stake
The communication breakdown led to customers receiving sub-par food, leading them to blame the restaurants instead of Grubhub. These detrimental complaints hurt restaurants’ reputations and revenue streams, which have already been impacted since the COVID-19 pandemic. Restaurants contacted Grubhub to be removed from their platform, only to be met with a sales pitch for partnerships. The numerous complaints led to the monumental FTC filing.
According to the FTC Chair Lina M. Khan, “Today’s action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25 million for the people cheated by Grubhub’s tactics,”
Grubhub’s Response: Denial of Allegations and Commitment to Transparency
Meanwhile, Grubhub has publicly countered that it has cooperated with the FTC for years while its food delivery business was under review. Grubhub’s press release states, “At Grubhub, we’re committed to transparency so that every single day diners, restaurants, and drivers can make well-informed choices to do business with us,” the release 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 “While we categorically deny the allegations made by the FTC, many of which are wrong, misleading, or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward.”
The Scale of the Problem: Over 325,000 Unaffiliated Restaurants
The complaint goes on to state that Grubhub has over 325,000 unaffiliated restaurants on its platform, which is double the actual number of available restaurants. The scale grossly affected the unaffiliated restaurants by offering outdated menus and a chaotic ordering system. When diners searched for a restaurant, the search engine pointed them to Grubhub instead of the independent restaurant, which led to a decrease in sales. Another major issue is that restaurants were overwhelmed with phone Grubhub food orders, including menu items that were not available. Grubhub drivers would often pay for food using Grubhub credit cards, many of which had insufficient funds, leaving the restaurants to foot the bill.
Grubhub’s Planned Changes
Grubhub’s press release announces changes the company is making to improve transparency and diner satisfaction. In addition to paying the suspended judgment of $25 million, the delivery service has agreed to make it easier for its customers to understand its fees and how it communicates publicly. Communication involves how Grubhub advertises, the earning potential of delivery partners, and other public communication.
The allegations and press releases come in light of Grubhub’s being sole to start Wonder in November 2024 after being previously sold in 2021 to Just Eat Takeaway. The delivery service was sold for $600 million after being sold originally for $7.3 billion. Grubhub is committed to righting the alleged wrongs it has committed and should remain a driving force in the food delivery industry.
