Grubhub, FTC Reach $25 Million Settlement in Junk Fees Suit (2)

Grubhub Inc. agreed to pay $25 million to settle claims it misled customers about delivery costs in violation of federal laws, according to the Federal Trade Commission.

“Rather than growing organically through honest tactics, Grubhub decided to take shortcuts and lure customers by deceiving them,” FTC Chair Lina Khan said at a news conference announcing the settlement Tuesday.

The FTC and Illinois filed a complaint against Grubhub Tuesday in the US District Court for the Northern District of Illinois. Grubhub, the FTC, and Illinois filed a joint settlement proposal the same day.

Illinois Attorney General Kwame Raoul said at the news conference that the settlement represents the culmination of a multi-year probe. “The settlement we’ve reached requires the immediate termination of illegal conduct and provides direct relief to consumers,” he 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“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward,” Grubhub said in a statement.

The company, which operates an online food ordering and delivery service, misled and mistreated customers by “deceiving them about how much services cost, promising one price but charging more through hidden fees,” according to the complaint.

The hidden fees often double the advertised cost of delivery, the complaint says.

Grubhub has engaged in a “pricing shell game” since 2019, whereby it advertises that customers will pay a single, low-cost amount for services in connection with a delivery order, but the company will add undisclosed fees that result in a higher final price, the complaint says.

At no point before the final check-out screen on the company’s site does Grubhub inform a customer about these additional fees, or that it will ultimately charge more than the originally advertised delivery fees, the plaintiffs say.

The company knew this fee approach was “essential to attracting more diners,” the complaint says. Customers are more inclined to place an order when they see a lower delivery fee, it says.

The complaint also says the company has offered a subscription plan since 2020 called Grubhub+, which tells subscribers they can receive unlimited free delivery. But the plan misleads customers because Grubhub charges numerous fees, including a service fee, a small order fee on orders less than $12, and a delivery fee on orders from restaurants that don’t participate in the plan, the complaint says.

And Grubhub makes it difficult for customers to cancel the plan because it “buries the cancellation option behind a series of pages in consumers’ account settings that many consumers have difficulty locating,” the plaintiffs say.

The 11-count complaint says Grubhub violated the Federal Trade Commission Act and the Restore Online Shoppers’ Confidence Act, among other claims.

The case is Fed. Trade Comm’n v. Grubhub Inc., N.D. Ill., No. 24-cv-12923, complaint 12/17/24.