Food delivery service Grubhub has agreed to pay $25 million to settle a Federal Trade Commission (FTC) lawsuit alleging the company tricked customers and lied to drivers, while also damaging the reputation of restaurants that did not partner with Grubhub.

According to FTC Chair Lina Khan, Grubhub's deceptive practices included misleading customers about delivery costs, advertising inflated hourly pay rates for drivers, and adding hidden fees to orders. The company was also accused of charging Grubhub Plus members for delivery despite advertising the subscription as having "free" or "$0" deliveries.

The FTC's initial complaint claimed that Grubhub began advertising lower delivery fees in 2019 to attract more customers, but then added a "service" fee that increased the cost of orders anyway. This practice resulted in customers being charged hidden fees, raising their total order price. Additionally, Grubhub allegedly made it easy for users to sign up for Grubhub Plus but difficult to cancel, while also blocking the accounts of users with large gift card balances.

Grubhub was also accused of adding restaurants to its platform without their consent, resulting in customers experiencing issues with their orders and leaving negative feedback for unaffiliated restaurants. The FTC claimed that Grubhub had as many as 325,000 unaffiliated restaurants on its platform, more than half of all available restaurants on the service.

As part of the proposed settlement, Grubhub will be required to make several changes to its platform. The company must show customers the total delivery cost when they place an order, and can no longer add "junk fees" to orders. Grubhub is also banned from listing unaffiliated restaurants on its platform and can only make driver earnings claims that it can back up with evidence and in writing.

Furthermore, Grubhub must notify customers when they're banned and offer a way to appeal the decision, as well as make it easier to cancel Grubhub Plus. The $25 million settlement will go toward refunding affected customers, but the FTC says the full judgment will be due "immediately" if Grubhub "is found to have misrepresented its financial status."

In a statement to The Verge, Grubhub spokesperson Najy Kamal said, "While we categorically deny the allegations made by the FTC, many of which are wrong, misleading or no longer applicable to our business, we believe settling this matter is in the best interest of Grubhub and allows us to move forward."

The settlement marks a significant victory for the FTC, which has been cracking down on deceptive practices in the tech industry. The agency's efforts to protect consumers and promote fair competition are likely to have a lasting impact on the food delivery market and beyond.

In related news, the FTC has also officially banned hidden junk fees from hotel and ticket prices, further solidifying its commitment to consumer protection.

The Grubhub settlement serves as a warning to tech companies to prioritize transparency and honesty in their business practices. As the tech industry continues to evolve, it's clear that regulators will remain vigilant in protecting consumers and promoting a fair and competitive market.