The
Federal Trade Commission (FTC) and the Illinois Attorney General have secured a major settlement with Grubhub after accusing the food delivery platform of deceptive business practices that allegedly harmed consumers, delivery drivers, and restaurants nationwide. Under the agreement, Grubhub will pay $25 million, with most of the money earmarked for consumer refunds, while also overhauling several of its business practices. The case marks one of the FTC’s most significant enforcement actions involving a gig economy platform and underscores the growing legal risks facing digital marketplaces.
For attorneys, in-house counsel, and compliance professionals, the settlement highlights increasing federal scrutiny of online platforms that advertise pricing, recruit independent contractors, and manage third-party business relationships.
Key Takeaways
- The FTC and Illinois Attorney General accused Grubhub of deceptive advertising and unfair business practices.
- Grubhub agreed to pay $25 million while implementing significant operational reforms.
- Regulators alleged the company hid delivery fees, overstated driver earnings, and listed restaurants without permission.
- The settlement also requires clearer pricing, easier subscription cancellations, and stronger consumer protections.
- The case signals continued enforcement against gig economy and technology companies.
FTC Alleges Grubhub Misled Users
According to the complaint, Grubhub engaged in a broad pattern of deceptive conduct designed to increase orders and expand its market share. Regulators allege the company misrepresented delivery costs, promoted unrealistic earnings for delivery drivers, and listed restaurants that never agreed to participate on its platform.
FTC officials argued that these practices harmed several groups simultaneously. Diners allegedly paid unexpected fees, drivers relied on inflated income claims, and restaurants experienced reputational damage when orders went wrong despite having no formal relationship with Grubhub. Consequently, the agency pursued relief for consumers while requiring changes to the company’s business practices.
Hidden Fees Under Fire
One of the FTC’s primary allegations involved Grubhub’s pricing practices.
Regulators claimed the company advertised low-cost or free delivery but disclosed additional fees only near the end of the checkout process. As a result, consumers often paid more than they initially expected.
Additionally, the complaint alleges Grubhub promoted its Grubhub+ subscription as providing “free” delivery even though many subscribers still incurred delivery-related charges and other fees. Authorities also claimed customers encountered unnecessary barriers when attempting to cancel their subscriptions.
The FTC further alleged that some consumers lost access to accounts containing gift card balances without adequate notice or a meaningful opportunity to appeal the decision.
FTC Challenges Driver Pay Claims
The lawsuit also focused heavily on Grubhub’s recruitment of delivery drivers.
According to regulators, the company advertised hourly earnings that only a small percentage of drivers actually achieved. For example, advertisements suggested drivers in certain markets could earn up to $40 per hour, despite median earnings being substantially lower.
Furthermore, the FTC alleged Grubhub continued making these earnings claims after receiving a federal Notice of Penalty Offenses warning companies against deceptive income representations. That allegation could become increasingly important as federal agencies continue monitoring gig economy recruiting practices.
Restaurants Listed Without Consent
Another major allegation centered on Grubhub’s relationship with restaurants.
According to regulators, Grubhub listed hundreds of thousands of restaurants that had never agreed to join the platform. Some businesses reportedly objected to their inclusion, yet customers could still attempt to place orders through Grubhub.
The FTC alleged these unauthorized listings created confusion over menus, pricing, and delivery times. Meanwhile, restaurants sometimes received customer complaints for delayed or inaccurate orders that they neither accepted nor fulfilled through the platform.
Regulators also claimed payment card failures occasionally disrupted transactions, further harming restaurant operations and customer trust.
FTC Settlement Terms
Beyond the monetary payment, Grubhub agreed to implement several significant compliance measures.
Among other requirements, the company must:
- Clearly disclose the total cost of delivery before checkout.
- Stop adding unauthorized restaurants to its marketplace.
- Support all driver earnings claims with reliable evidence.
- Make Grubhub+ subscriptions easier to cancel.
- Notify customers when accounts are restricted and provide an appeals process.
- Improve transparency surrounding fees and platform practices.
The proposed order includes a $140 million monetary judgment. However, regulators suspended most of that amount after determining Grubhub lacked the financial ability to pay the full judgment immediately. The company must pay $25 million now, while the remaining balance could become due if regulators determine Grubhub misrepresented its financial condition.
Why This Settlement Matters
The Grubhub case reflects a broader trend in consumer protection enforcement.
Federal and state regulators have increasingly challenged hidden fees, deceptive advertising, subscription practices, and misleading earnings claims across technology platforms. Consequently, companies operating digital marketplaces now face heightened compliance expectations.
For law firms, the settlement creates growing opportunities in several practice areas, including:
- Consumer protection litigation
- Regulatory compliance
- Advertising law
- Technology transactions
- Gig economy counseling
- Class action defense
- Government investigations
Meanwhile, corporate legal departments may expand internal compliance reviews to reduce exposure under federal and state consumer protection laws.
FTC Signals Tougher Platform Enforcement
The Grubhub settlement demonstrates that regulators remain willing to coordinate complex investigations involving multiple government agencies and large technology companies.
As digital platforms continue expanding into new markets, attorneys should expect increased scrutiny of pricing transparency, online advertising, subscription programs, contractor recruitment, and marketplace governance. Businesses that depend on aggressive customer acquisition strategies may face greater pressure to ensure marketing claims are accurate and fully substantiated.
For legal professionals advising technology companies, the case serves as another reminder that compliance failures can quickly evolve into nationwide enforcement actions carrying significant financial and reputational consequences.
Frequently Asked Questions
Why did the FTC take action against Grubhub?
The FTC alleged that Grubhub misled consumers about delivery costs, exaggerated driver earnings, listed restaurants without permission, and used unfair subscription and account management practices.
How much is the Grubhub settlement?
Grubhub agreed to pay $25 million immediately. The proposed settlement also includes a suspended $140 million judgment that could become enforceable under certain circumstances.
Who may benefit from the settlement?
The FTC intends to distribute refunds to eligible consumers harmed by the alleged practices after the settlement receives court approval and a redress process is established.
What does this mean for gig economy companies?
The settlement signals continued regulatory oversight of digital marketplaces, particularly regarding hidden fees, earnings advertising, subscription practices, and consumer transparency. Companies operating platform-based businesses should expect increased compliance expectations.
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FTC Forces $23.8M Grubhub Refund for Drivers first appeared on
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