Grubhub to Settle Class Action Lawsuit Alleging False Advertising

Grubhub has agreed to a preliminary settlement in which it will pay $7.1 million to restaurants that alleged the company harmed their reputations by falsely advertising that they had partnered with the online food delivery platform.

The plaintiffs’ lawyers in the class action lawsuit filed the preliminary settlement Tuesday (Aug. 26), and it now awaits a judge’s approval, Reuters reported Wednesday (Aug. 27).

The class action lawsuit includes a settlement class of about 387,000 restaurants and alleged that by including them on its online platforms without contracts or their consent, Grubhub confused consumers and caused a loss of sale for the restaurants, according to the release.

Reached by PYMNTS, a Grubhub spokesperson said in an email that the company had stopped listing restaurants that had not partnered with the company.

“While the practices alleged in this case have not been part of our business model for some time, we’re pleased to settle this case so we can move forward and continue providing excellent value to the over 415,000 merchants who choose to partner with us every day,” the spokesperson said.

In another, separate case, Grubhub agreed in December to pay $25 million and make several changes to its operations to settle charges that it violated consumer protection and competition laws.

In that case, the Federal Trade Commission and the Illinois attorney general alleged that Grubhub deceived diners about delivery costs, blocked their access to their accounts and funds, deceived workers about how much money they would make delivering foods, and listed restaurants on its platform without their permission.

“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,” Lina M. Khan, who was chair of the FTC at the time, said in a Dec. 17 press release. “There is no ‘gig platform’ exemption to the laws on the books.”

Grubhub said at the time in a press release that it cooperated with the FTC during the review of its business and that it would make changes to its platform.

“While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward,” the company said in the release.