Grubhub Settlement: Grubhub, a leading food delivery service in the U.S., has decided to settle a lawsuit from the Federal Trade Commission (FTC) for $25 million. The lawsuit accused the company of misleading its customers, drivers, and restaurants. The settlement represents an important change for Grubhub, as it will need to make major updates to its platform to improve transparency and responsibility.
Let’s take a closer look at the situation, the claims made, and what this settlement means for customers, drivers, and restaurants.
What the FTC Accused Grubhub Of
1. Hidden Fees That Confuse Customers
The FTC claims that Grubhub tricked customers by hiding the real costs of its services. While promoting low delivery fees, Grubhub supposedly added extra “service” fees at checkout, which raised the total order price.
- These misleading tactics are said to have started around 2019.
- Grubhub Plus subscribers, who were told they would get free or “$0” deliveries, found themselves facing additional delivery fees, which went against what was promised with their subscriptions.
2. Overstated Pay Claims for Drivers
Grubhub faced allegations of inflating driver earnings in its ads, showing higher hourly rates that they couldn’t back up. This approach reportedly misled drivers into joining the service based on false information.
3. Listings of Unauthorized Restaurants
The lawsuit stated that Grubhub included 325,000 restaurants on its platform that had not agreed to partner with them—over half of all restaurants listed.
- Customers ordering from these unauthorized restaurants often encountered issues, like wrong menu items or delays, which hurt the reputations of these establishments.
4. Difficulties with Subscription Cancellations
The FTC also pointed out how Grubhub made it simple for people to sign up for the Grubhub Plus subscription but made cancellation much harder. Moreover, the company allegedly blocked the accounts of users who had large gift card balances, leading to frustration among those customers.
Grubhub’s Settlement: Important Changes and Refunds
To settle the lawsuit, Grubhub has agreed to some key points:
$25 Million Payment
Grubhub will pay $25 million to refund customers who were affected. The FTC originally wanted $140 million, but that was lowered because Grubhub couldn’t cover the full amount. If it turns out the company misled anyone about its finances, it will owe the full $140 million right away.
Clear Pricing
From now on, Grubhub has to show the complete delivery cost right at the start, including all fees, so customers will know exactly what they are paying without any surprises.
No More “Junk Fees”
Grubhub cannot add in extra fees that are not necessary or explained, which means customers should see lower costs.
Easier Grubhub Plus Changes
Grubhub will simplify the process for users who want to cancel their Grubhub Plus subscriptions. Also, if free delivery is advertised, subscribers should not be charged for delivery fees.
Honest Driver Earnings Information
Any statements about how much drivers can earn must be supported by proof and shared in writing, providing clear information for those considering becoming drivers.
Respecting Restaurant Listings
Grubhub cannot list restaurants on its site without their permission to avoid causing any damage to their reputation.
Grubhub’s View on the Settlement
Grubhub released a statement disagreed with the FTC’s allegations, claiming many were “wrong, misleading, or no longer relevant” to their operations. However, the company chose to settle the lawsuit to avoid a drawn-out legal fight.
In a blog post, Grubhub mentioned that settling will allow them to focus on enhancing their platform and delivering better services for customers, drivers, and restaurants.
How This Affects Customers, Drivers, and Restaurants?
- For Customers: You can look forward to straightforward pricing without any surprise fees. Grubhub Plus members should enjoy their promised free deliveries. Some users affected might be eligible for refunds from the $25 million settlement.
- For Drivers: You will now have clear and honest details about what you can earn. The settlement helps ensure that new drivers are recruited fairly.
- For Restaurants: Listings of restaurants that aren’t authorized will be removed from the platform. This will help restaurants manage their online reputations better, leading to fewer complaints from customers due to platform mistakes.
Grubhub’s recent $25 million settlement represents a big shift for the company. It is a step towards more transparency in how they do business and a move to eliminate confusing fees. This agreement addresses existing issues and suggests that regulators, like the FTC, may pay closer attention to food delivery businesses in the future.
For everyone involved—customers, drivers, and restaurants—these changes aim to make the Grubhub experience clearer, more trustworthy, and smoother. Stay tuned to see how the settlement funds will be spent and how Grubhub will change its practices following this important development.