Numbers tell a story, but rarely without help.
On Tuesday, Illinois Attorney General Kwame Raoul announced his office reached a preliminary settlement agreement with Grubhub, one of the leading app-based food delivery services. If a federal judge agrees, the company will pay $25 million to end a lawsuit alleging it violated the state’s Consumer Fraud and Deceptive Business Practices Act.
If that sounds familiar, it’s because the details are strikingly similar to an agreement Raoul’s office announced last month to settle a Cook County lawsuit in which DoorDash would pay $11.25 million. The present action also involves the Federal Trade Commission and goes far beyond the DoorDash allegations, which centered on a payment structure wherein the company used customer tips to pay drivers rather than the promised amount from corporate coffers.
Grubhub, according to Raoul, “misled consumers about the cost of delivery and the benefits of a Grubhub Plus subscription; misled drivers about the amount of money they could make; and listed restaurants on Grubhub’s app without their knowledge or consent, and in some instances, over their explicit objections.”
Unlike the DoorDash settlement, which included information about how many drivers stood to divide the settlement pool, the Grubhub deal is short on details. According to the agreement (tinyurl.com/GrubhubTerms), the company will pay $200,000 to the Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund. The other $24.8 million goes to the FTC, which says it will distribute the money as restitution to consumers nationwide.
Business of Apps, a London-based research firm, on Monday said Grubhub had 24.6 million active users in 2023 – defined as those who use the app at least monthly – and more than 300,000 restaurant partners. In other words, everyone gets $1 from a company that generated $2.1 billion in revenue last year, its first decline since launching in 2010.
As with DoorDash, the relief goes beyond dollars. The FTC said Grubhub, among other conditions, “agreed to tell the truth in its advertisements, disclose all mandatory delivery fees, refrain from blocking accounts without notice, stop misleading people about restaurant affiliations, stop misrepresenting delivery driver earnings, and comply with the Restore Online Shoppers’ Confidence Act.”
With DoorDash I noted the implied benefit of a potential warning to other companies that might pursue similar strategies. The FTC sidesteps subtlety with a website post explicitly telling businesses what to learn from Grubhub’s example. Unspoken is whether the litigation factored in Grubhub’s sale price dropping from $7.3 million in 2020 to $650 million for a deal scheduled to close in early 2025, according to CNN.
The DoorDash punishment seemed a cost of doing fairly lucrative business. Grubhub is comparatively struggling, but its financial penalty is even less helpful to aggrieved parties.
• Scott T. Holland writes about state government issues for Shaw Local News Network. Follow him on X @sth749. He can be reached at sholland@shawmedia.com.
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