The Federal Trade Commission (FTC) and Illinois Attorney General announced a settlement with Grubhub following allegations of widespread deceptive practices. These practices impacted diners, restaurants, and delivery drivers, violating federal and state consumer protection laws.

Key Allegations:

1. Misleading Subscription Promises: Grubhub+ subscribers, paying $9.99/month for “unlimited free delivery,” were still charged additional fees, such as “service” and “small order” fees, which were not clearly disclosed.
   
   
2. Hidden Fees: Grubhub advertised low delivery costs but added fees that significantly increased total charges, often appearing after users had chosen their meals.
   
   
3. Blocked Accounts: Customers were blocked without notice, losing access to account balances, including stored gift card funds.
   
   
4. Unauthorized Restaurant Listings: Restaurants were listed without consent, damaging reputations when issues like delayed deliveries occurred.
   
   
5. Misleading Driver Earnings: Grubhub claimed drivers could earn up to $26/hour, a figure achieved by only the top 2%, contrary to broader driver experiences.

Subscription-Specific Details from the FTC Case:

1. Grubhub+ Subscription Issues:
   
   • Promised “unlimited free delivery” while still charging hidden fees.
   • Restrictions on benefits, such as applying only to participating restaurants, were not clearly communicated.
     
     
2. Difficulty Cancelling Subscriptions:
   
   • Cancellation processes were cumbersome, potentially violating the Restore Online Shoppers’ Confidence Act (ROSCA).
     
     
3. Compliance with “Click to Cancel Rule”:
   
   • Grubhub must now implement simple, user-friendly cancellation options, including online methods that match the ease of signing up.
     
     
4. Transparency Requirements:
   
   • Grubhub must disclose all material terms, including fees and restrictions that affect promised benefits.
     
     
5. Restitution for Subscribers:
   
   • Misled Grubhub+ subscribers may benefit from the $25 million settlement.

Settlement Requirements for Grubhub:

• Clearly disclose fees and subscription terms.
• Simplify cancellation processes for subscriptions.
• Cease deceptive practices regarding fees, restaurant affiliations, and driver earnings.
• Pay $25 million of a partially suspended $140 million judgment due to financial constraints.

INSIDER TAKE:

The Grubhub settlement underscores the importance of transparency and compliance in subscription models. Subscription businesses must prioritize:

1. Clear Communication: Clearly articulate fees and benefits to avoid misleading subscribers.
   
   
2. Simple Cancellation: Ensure compliance with ROSCA and “Click to Cancel” mandates for user-friendly cancellation processes.
   
   
3. Truth in Advertising: Claims about benefits, such as “free delivery,” must align with actual service offerings.
   
   
4. Proactive Compliance: Regularly audit subscription practices to ensure alignment with regulatory standards and consumer trust.

For subscription-based companies, the Grubhub case serves as a critical reminder that deceptive practices can erode trust, incur regulatory penalties, and damage brand reputation.