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Complaint for Permanent Injunction — FTC and Illinois v. Grubhub Inc. (N.D. Ill., ECF 1, filed 12/17/24)

Summary

A complaint for permanent injunction, monetary judgment, civil penalty judgment and other relief, filed December 17, 2024 by the Federal Trade Commission and the People of the State of Illinois against Grubhub Inc. and Grubhub Holdings Inc. in the U.S. District Court for the Northern District of Illinois, Case 1:24-cv-12923, Document 1. The complaint alleges that Grubhub added undisclosed fees at checkout, used deceptive enrollment and cancellation tactics for its Grubhub+ subscription, and blocked diners' accounts and gift card funds. It alleges that more than 320,000 of approximately 610,000 restaurants on the platform were at one point listed without authorization, and that drivers were told of earnings such as $26 per hour while the median driver earned $11 per hour in 2023. The 66-page complaint asks for injunctive relief, monetary relief and Illinois civil penalties.

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Cite this document

“Complaint for Permanent Injunction — FTC and Illinois v. Grubhub Inc. (N.D. Ill., ECF 1, filed 12/17/24).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/ftc-and-illinois-v-grubhub-inc-n-d-ill-1-24-cv-12923-complaint-ecf-1-2edd437424/, SHA-256 38c69735623aa6c763a6f05180d177274fae6aeee279a6118836141c46ccb247.

Full text

      Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 1 of 66 PageID #:1




                             UNITED STATES DISTRICT COURT
                             NORTHERN DISTRICT OF ILLINOIS


  FEDERAL TRADE COMMISSION and                                 Case No. ____________

  PEOPLE OF THE STATE OF ILLINOIS,                             COMPLAINT FOR PERMANENT
                                                               INJUNCTION, MONETARY
            Plaintiffs,                                        JUDGMENT, CIVIL PENALTY
                                                               JUDGMENT, AND OTHER
            v.                                                 RELIEF

  GRUBHUB INC., a corporation, and

  GRUBHUB HOLDINGS INC., a corporation,

            Defendants.


                                            COMPLAINT

       Plaintiffs the Federal Trade Commission (“FTC” or “Commission”), and the People of

the State of Illinois, by Kwame Raoul, Illinois Attorney General, for their Complaint allege:

       1.        The FTC brings this action for Defendants Grubhub Inc. and Grubhub Holdings

Inc.’s violations of Section 5(a) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §

45(a); the Restore Online Shoppers’ Confidence Act (“ROSCA”), 15 U.S.C. § 8401 et seq.; the

FTC’s Trade Regulation Rule entitled “Impersonation of Government and Businesses”

(“Impersonation Rule”), 16 C.F.R. pt. 461; and for Defendants’ participation in acts and

practices that the Commission has previously determined to be unfair and deceptive, in

connection with their sale of food ordering and delivery services. For these violations, the FTC

seeks relief, including permanent injunctive relief and monetary relief, pursuant to Sections 13(b)

and 19 of the FTC Act, 15 U.S.C. §§ 45(a), 53(b), and 57b; and ROSCA, 15 U.S.C. § 8404.

       2.        Plaintiff People of the State of Illinois, as part of the same case or controversy,

also brings this action for Defendants’ violations of the Illinois Consumer Fraud and Deceptive
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Business Practices Act, 815 ILCS 505 (“Consumer Fraud Act”), and the Illinois Uniform

Deceptive Trade Practices Act, 815 ILCS 510. The Attorney General of the State of Illinois

brings this action under Section 7 of the Illinois Consumer Fraud and Deceptive Business

Practices Act (815 ILCS 505/7) to obtain a permanent injunction, restitution, and civil penalties

against Defendants.

                                   SUMMARY OF THE CASE

       3.      Grubhub Inc. and Grubhub Holdings Inc. (together, “Grubhub”) operate

Defendants’ online food ordering and delivery service. Grubhub allows diners to browse

thousands of restaurant offerings and order food for delivery or pickup from those restaurants by

using a single, consolidated platform. Grubhub’s platform includes the food ordering and

delivery system under the Seamless brand, which Grubhub acquired through a merger in 2013—

one of multiple acquisitions that have contributed to its growth.

       4.      Grubhub has grown enormously over the last decade, becoming one of the largest

online ordering and delivery services in the country. It operates in over 2,400 U.S. cities, with

more than 500,000 restaurants on its platform, and over 200,000 delivery drivers. Each year,

approximately 31 million active diners place 262 million orders through Grubhub.

       5.      As a digital platform, Grubhub had to achieve a critical mass of customers in

order to gain scale. The more restaurants it signed up, the more diners would be likely to use

Grubhub—and more diners, in turn, would draw more restaurants. More business meant more

reviews, more data, and other benefits that would turbocharge Grubhub’s momentum and allow

it to experience accelerated growth.

       6.      Faced with these incentives, Grubhub resorted to dishonesty and underhanded

tactics in its quest to gain scale. It has consistently misled and mistreated the market participants

it relies on to do business: the diners that place food orders through Grubhub’s platform, the

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restaurants whose offerings Grubhub markets and delivers, and the drivers who deliver the orders

made through Grubhub.

       7.      Grubhub harms diners by deceiving them about how much its services cost,

promising one price but charging more through hidden fees. A former Grubhub executive has

even described these tactics as “pricing shell games.” Grubhub first baits diners with a single,

low-cost (or no-cost) delivery charge on its landing, browse, search, and ordering pages. Enticed

by this low fee, diners proceed to search for restaurants, make a selection, and populate their

bags with menu items. At each step in the process, Grubhub continues to present diners with that

same low-cost fee, leading diners to believe that this fee represents the total cost of Grubhub’s

services. Once diners reach the checkout screen, though, Grubhub then saddles them with

additional undisclosed fees for the same services. These hidden fees are hefty, often doubling the

advertised cost of delivery. Grubhub’s tactics draw in diners who might have been put off by the

actual, and much higher, cost of using Grubhub’s services. Grubhub’s misleading promises

generate hundreds of millions of dollars in annual revenue for the company. In a single year,

Grubhub pocketed close to half a billion dollars through just one of these hidden fees.

       8.      Grubhub also uses deceptive enrollment and cancellation tactics to lock diners

into Grubhub+, its monthly subscription service. Grubhub touts that subscribers will enjoy “free

delivery” or “$0 delivery”—that is, they will not pay Grubhub a charge for food delivery. That,

however, is false: Grubhub+ subscribers are subject to many of the same undisclosed fees that

non-subscribers must pay. Once diners join through the easy enrollment process, Grubhub traps

them into the subscription by making it difficult to cancel.

       9.      Grubhub also denies diners’ use of their Grubhub accounts and gift card funds.

Grubhub frequently flags diners with multiple or high gift card balances, cancels the diners’

orders, and blocks them from placing further orders, which prevents them from using their gift

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card balances and other credits. Unlike legitimate efforts to prevent fraud, Grubhub’s tactics

allow it to seize and pocket diners’ money for itself. Grubhub routinely fails to provide diners

with any notification that their accounts are blocked or any means to restore access to their

frozen funds. As a result, Grubhub often permanently denies those diners the use of their

legitimate gift cards, effectively confiscating diners’ money. For years, thousands of consumers

have complained about Grubhub’s undisclosed and irremediable account blocks, which have

remained among the top sources of consumer discontent.

       10.     With respect to restaurants, Grubhub relies on partnerships to build out its

platform offerings. But it has fueled its dramatic growth by falsifying hundreds of thousands of

its restaurant affiliations, listing restaurants on its platform without their knowledge or consent

(“Unaffiliated Restaurants”). Grubhub has no relationship with these Unaffiliated Restaurants,

but it falsely represents that it is affiliated with them by creating listings for them and accepting

diners’ orders from those restaurants. For Grubhub, these misrepresentations are a quick and

cheap way to add restaurant offerings and build scale. But Grubhub’s deception harms

restaurants and diners alike. Orders from these restaurants regularly result in higher charges to

diners, delivery delays, cancellations, order inaccuracies, and other problems, for which diners—

unaware that the restaurants are unaffiliated with Grubhub—inevitably blame the restaurant

rather than Grubhub.

       11.     Grubhub executives pursued these fake affiliations as a core part of Grubhub’s

growth strategy, describing it as a “mechanism to gain national scale.” At one point, over half of

all the restaurants on Grubhub’s platform—more than 320,000 of approximately 610,000

restaurants—were Unaffiliated Restaurants listed without authorization.

       12.     Restaurants that learn they are on Grubhub’s platform without authorization often

demand to be removed, but Grubhub typically stalls and tries to sell them a paid partnership

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instead. Thousands of restaurants have sent legal demands to Grubhub requesting to be removed

from the platform. Often, the only way Grubhub will remove the restaurants is if they threaten

legal action or go to the press.

       13.     Finally, Grubhub has relied on hundreds of thousands of drivers to accommodate

its growth. But rather than attracting drivers through offering better opportunities, Grubhub has

lured them by misrepresenting their potential earnings. Grubhub has advertised to potential

drivers that they are likely to attain lucrative hourly earnings, such as $26 per hour. In reality, the

vast majority of drivers never earn the advertised amounts. The median Grubhub driver earned

only $11 per hour in 2023, and only the top 2% of drivers actually earn the promised hourly

rates. Grubhub has known for years that its earning claims are not substantiated, but continued

deceiving drivers rather than correcting its claims.

       14.     Grubhub has long been aware of the harms caused by these problematic diner,

restaurant, and driver-facing practices, which have generated hundreds of thousands of consumer

complaints. Nevertheless, Grubhub has persisted with these practices—choosing to chase scale

through misleading and mistreating consumers rather than through honest competition.

                                   JURISDICTION AND VENUE

       15.     This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a),

1345, and 1355.

       16.     This Court has supplemental jurisdiction over the State of Illinois’s claims

pursuant to 28 U.S.C. § 1367.

       17.     Venue is proper in this District under 28 U.S.C. §§ 1391(b)(1), (b)(2), (c)(2), and

(d), 1395(a), and 15 U.S.C. § 53(b).




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                                            PLAINTIFFS

        18.     The FTC is an independent agency of the United States Government created by

the FTC Act, which authorizes the FTC to commence this district court civil action by its own

attorneys. 15 U.S.C. §§ 41-58. The FTC enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a),

which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC also

enforces the Restore Online Shoppers’ Confidence Act, 15 U.S.C. § 8401 et seq., which prohibits

a party from charging for certain online transactions unless it has clearly disclosed all material

terms of the transaction; and the Impersonation Rule, 16 C.F.R. pt. 461, which prohibits the

impersonation of government, businesses, and their officials or agents in interstate commerce.

        19.     The State of Illinois is one of the fifty sovereign states of the United States.

Attorney General Kwame Raoul is the duly elected and qualified Attorney General, acting for

the Plaintiff State of Illinois, and brings this action in his official capacity for and on behalf of

the People of the State of Illinois, pursuant to the Provisions of the Consumer Fraud Act, 815

ILCS 505/7, and his common law authority as Attorney General to represent the People of the

State of Illinois.

        20.     The Illinois Attorney General believes this action to be in the public interest of the

citizens of the State of Illinois and brings this lawsuit pursuant to Section 7(a) of the Illinois

Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/7(a).

                                           DEFENDANTS

        21.     Defendant Grubhub Inc. is a Delaware corporation with its principal place of

business at 111 W. Washington Street, Suite 2100, Chicago, Illinois 60602. Grubhub Inc.

transacts or has transacted business in this District and throughout the United States. Grubhub

Inc. is a wholly owned subsidiary of Just Eat Takeaway.com N.V. (“Just Eat Takeaway”), a

Netherlands corporation.

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       22.     Defendant Grubhub Holdings Inc. is a Delaware corporation with its principal

place of business at 111 W. Washington Street, Suite 2100, Chicago, Illinois 60602. Grubhub

Holdings Inc. transacts or has transacted business in this District and throughout the United

States. Grubhub Holdings Inc. is a wholly owned subsidiary of Defendant Grubhub Inc.

       23.     Grubhub Inc. and Grubhub Holdings Inc. (together, “Grubhub”) operate

Defendants’ online food ordering and delivery service. At all times relevant to this Complaint,

acting alone or in concert with others, the Grubhub entities have advertised, marketed,

distributed, and sold goods and services to diners and restaurants, and have also advertised and

marketed delivery-driver jobs to potential workers.

                                  COMMON ENTERPRISE

       24.     Defendants Grubhub Inc. and Grubhub Holdings Inc. have operated as a common

enterprise while engaging in the unlawful acts and practices and other violations of law alleged

below. The Grubhub entities have conducted the business practices described in this Complaint

through a network of interrelated companies that have common ownership, officers, managers,

business functions, employees, and office locations, and that commingled funds. Because the

Grubhub entities have operated as a common enterprise, each of them is liable for the acts and

practices alleged below.

                                         COMMERCE

       25.     At all times relevant to this Complaint, Defendants have maintained a substantial

course of trade in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act,

15 U.S.C. § 44, and Section 1 of the Illinois Consumer Fraud Act, 815 ILCS 505/1(f).

                           DEFENDANTS’ BUSINESS ACTIVITIES

       26.     Grubhub describes itself as the “leading online and mobile food-ordering and

delivery marketplace with the largest and most comprehensive network of restaurant partners.”

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       27.       Grubhub connects diners and restaurants. Diners across the country search for and

order food from restaurants for pickup and delivery using Grubhub’s desktop and mobile

applications. Restaurants pay to be listed on Grubhub’s platform and for other services, including

food delivery.

       28.       Under Grubhub’s business model, the company earns revenue both from diners

and restaurants.

       29.       Grubhub charges fees to diners that are assessed on a per-order basis.

       30.       Restaurants, for their part, pay commissions of approximately 15-20% per order

to be listed on Grubhub’s platform and to allow Grubhub to process orders on their behalf.

Restaurants that choose to use Grubhub’s optional delivery services pay additional fees of

approximately 10% per order.

       31.       Grubhub offers delivery services in over 600 geographical areas, including

delivery service areas within the State of Illinois, covering over 2,400 cities and more than 85%

of the United States population. To carry out these services, Grubhub engages over 200,000

delivery drivers around the country.

       32.       Grubhub classifies its delivery drivers as independent contractors rather than

employees. Grubhub requires drivers to provide their own cars, gas, insurance, and maintenance,

and it pays drivers for each order they accept and complete.

       33.       Grubhub has engaged in a series of illegal practices directed at diners, restaurants,

and drivers alike.

I.     Grubhub Lures Diners by Misrepresenting Delivery Fees

       34.       Since at least 2019, Grubhub has obscured from diners the true cost of its

services—a tactic that a former executive has conceded is a “pricing shell game.” For years,

Grubhub has advertised that diners will pay a single, low-cost amount for Grubhub’s services in

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connection with a delivery order. In reality, Grubhub tacks on additional undisclosed fees for

those same services—resulting in a final price that is often more than double what it originally

advertised.

       A.      Grubhub Advertises a Single, Low-Cost Fee for Its Services

       35.     To entice consumers to order from Grubhub, the company prominently advertises

a single, flat fee in connection with a delivery order. Grubhub’s advertised fee is low, typically

ranging from $0 to $5.99.

       36.     When diners arrive at Grubhub’s landing page, in some instances, they may see

Grubhub touting that diners can “order online for free”—suggesting that diners will not pay any

fees to use its food-ordering services.

       Figure 1.




       37.     Next, when diners begin searching or browsing for restaurants on Grubhub’s

desktop platform, Grubhub displays a single, low-cost or zero-dollar delivery fee. In the search

and browse view shown below, for instance, diners see the associated fee for delivery orders

from each restaurant, ranging in this scenario from “$0 delivery” to “$2.49 delivery.” The fee for

Palenque Colombian Food, for example, is advertised as “$2.49 delivery.”




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       Figure 2.




       38.     After selecting a restaurant from Grubhub’s browse and search pages, a diner

lands on the specific restaurant’s site, like the one from Palenque shown below. This page

features a digital menu and other restaurant information, like the address, telephone number,

rating, and delivery time.

       Figure 3.




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       39.     Once a diner has decided to order from a particular restaurant, she begins adding

menu items to her “bag.” Clicking the shopping bag icon at the top right of the screen, as shown

in the figure below, reveals the “bag” window that displays all the food items a diner has

selected.

       Figure 4.




       40.     Grubhub’s “bag” window shows the cost of the selected food items in the “Items

subtotal” line, as depicted above. The “Items subtotal” line does not show the advertised fee,

which instead appears towards the top of the bag, in inconspicuous, small, light gray font against

a white background. In the Palenque example, for instance, a diner sees only “$2.49 delivery,”

which is the same fee that was advertised in the search and browse page.

       41.     When a diner has finished selecting menu items, Grubhub directs her to “Proceed

to Checkout” by clicking the large green button at the bottom of the bag window depicted above.
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Clicking this button reveals the checkout page shown below. The bag window appears at the top

right of the screen and features a bright green button prompting the diner to “Place your delivery

order.”

          Figure 5.




          42.    Many diners proceed to place their order by clicking the green “Place your

delivery order” button, believing that they are charged for the items they ordered, plus the

advertised delivery fee, taxes, and any tip they choose to leave for the driver. Grubhub charges

consumers each of those amounts. But unbeknownst to many consumers and unexpectedly to

others, Grubhub also charges substantial hidden fees that can force diners to pay double or triple

the advertised cost of delivery.

          43.    Grubhub calls these fees a “service fee” and a “small order fee.” In reality,

consumers do not get anything additional in return for these fees, as Grubhub treats them as part

of the cost of delivery—even though it omits these costs from the advertised “delivery fee.”


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Indeed, the “service fee,” in Grubhub’s words, is “directly tied to the act of delivering (i.e. it is

another form of delivery fee).” And for accounting purposes, Grubhub treats the two fees as part

of the same delivery fee, explaining that “delivery fee + service fee = the restaurant’s delivery

fee.” In an internal discussion about the service fee when Grubhub first introduced it, Grubhub

gave the example that, “a restaurant that normally charges a $4 delivery fee” could “instead have

a $1 delivery fee and a $3 service fee.” Likewise, the “small order fee” is an extra delivery

charge Grubhub adds to the advertised delivery fee for orders under an unstated minimum.

         44.    For many years, Grubhub charged diners the single advertised delivery fee. In or

around 2019, Grubhub adopted a new ploy to lure in more customers: advertise a lower “delivery

fee” but then move a portion of the delivery fee into a new “service fee” that is tacked on at the

end.

         45.    Grubhub does not reveal these reshuffled delivery fees to consumers when they

are searching for restaurants or even choosing food items. Instead, the first time in the ordering

process that Grubhub includes any information about these fees is at the end—after consumers

have already spent considerable time and effort searching for a restaurant and selecting items to

order. For example, below the “Place your delivery order” button in the bag window in Figure 5,

Grubhub displays the diner’s selected menu items, as well as the previously advertised $2.49

“delivery fee.” Beneath the delivery fee, however, in small, faint print is the ambiguously labeled

“Other fees.”

         46.    Grubhub does not describe those “Other fees” on the face of the checkout page

itself. Only consumers who notice and click on a small “i” next to “Other fees” see two hidden

fees, which Grubhub calls a “service fee” and a “small order fee.” Other consumers never notice

the “Other fees” line item at all.




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       47.     These hidden fees can more than double the original advertised cost of using

Grubhub’s delivery service. For instance, after adding these hidden components of Grubhub’s

delivery fees, the diner in the Palenque example ends up paying $7.49 in fees, not the $2.49 that

Grubhub advertised.

       48.     At no point before the final check-out screen does Grubhub tell the consumer

about these additional fees or that it will ultimately charge more than the delivery fee it originally

advertised. Nor is there any way for a consumer to avoid these extra charges; Grubhub mandates

them as part of the cost of delivery.

       B.      Grubhub Is Aware Its Advertised Fee Is Deceptive

       49.     Top executives directed the efforts in 2019 to hide fees from consumers and grow

the business, and even called Grubhub’s fee structure a “pricing shell game.”

       50.     As part of that “shell game,” Grubhub artificially lowered its advertised delivery

fee, knowing that this fee is diners’ “pain point”—that is, the cost that is top of mind for diners.

To lure diners and create the false impression of lower delivery fees, Grubhub renamed some of

its “delivery fee” as a new “service fee.” Indeed, when instituting the service fee in 2019,

Grubhub assured restaurants that diners’ delivery costs would remain the same—the delivery fee

would just be split into two. In a 2019 communication, Grubhub told restaurants that it was

testing different ways to present the delivery fee, which would now be “split into both a ‘delivery

fee’ and ‘service fee.’” But it assured restaurants that, “in every case,” the “total fees charged to

the diner will be exactly the same as before.”

       51.     In addition, Grubhub hid the “service fee” from diners. In 2019, it displayed the

fee early in the ordering process—including on the restaurant menu page and bag view. Grubhub

also displayed the small order fee in the bag view. Soon thereafter, however, Grubhub removed

the service fee and small order fee from those pages. Grubhub also removed other information


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about the fees entirely, such as how they were calculated (for example, that the service fee was

17% of the food order). Grubhub made these changes even though its market research confirmed

that diners preferred “straightforward pricing.”

       52.     Grubhub knew these “pricing shell game features” were essential to attracting

more diners. Pointing to an Uber Eats advertisement promoting a $0 delivery fee—while hiding

the true cost—a former executive noted that this tactic “is working for [Uber Eats] and others

and we need to figure out how to make this stuff work for us ASAP because we are just leaving

opportunity on the table (literally) while likely losing out on potential new diners that react to

this messaging.” Those diners, in particular, are more inclined to place an order when they see a

lower delivery fee.

       53.     Grubhub was also well aware that its pricing tactics were deceptive. Indeed, a

former executive acknowledged that the strategies were “misleading, eroding trust,” and “truly

more expensive” for the diner. He recognized that Grubhub could take the “intellectually honest”

course: “conclude that everyone else [using these tactics] is wrong” and “get super aggressive in

the press” to explain that these “pricing tactics” are “like a car company selling a car for FREE,

but charging you the full value of the car for the ‘engine.’” Ultimately, however, the executive

concluded that was a “highly unlikely” path, and his “strong bias” was to continue charging

misleading but lucrative fees.

       54.     Unsurprisingly, if diners discover that delivery costs more than Grubhub

advertises, they often complain. As one diner and shareholder recounted to Grubhub, the

reshuffled fees make ordering online “laborious,” as it “takes me upwards of 45 minutes” to

place an order. He explained that, “to identify what the delivery fee is, I will typically choose a

restaurant, add a random item to the bag, go to the checkout page to see what the fee is,” all of

which “takes a LOT of time.” This process, the customer explained, “is BEYOND frustrating.”

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        55.    Grubhub’s deceptive pricing tactics are highly lucrative. The company’s market

research confirms that lower delivery fees draw in diners, because that fee is “most top-of-mind

when thinking about the cost of ordering delivery.” Once locked in, the diners become “oblivious

to service fees,” which are “baked into the product.”

        56.    As such, around the time Grubhub launched its service fee, a former executive

confirmed that Grubhub found a “significant increase in conversion”—that is, the rate at which

diners complete an order—by reducing the delivery fee and “introducing a service fee for the

remainder.” This, he proclaimed, is a “MASSIVE increase for diner productivity—far larger than

any other [test] we have executed and there is NO change to actual diner fees.”

        57.    Grubhub has shifted a substantial portion of the cost to use its delivery platform to

its hidden service fee. It is integral to Grubhub’s business and has become the highest-grossing

diner fee. Indeed, in 2022, Grubhub earned $482 million from “service fees” alone—

significantly more than the $293 million it earned in delivery fees.

II.     To Lure and Lock Diners Into Its Subscription Program, Grubhub Uses Deceptive
        Enrollment Tactics and Obstructs Cancellation

        58.    Since early 2020, Grubhub has offered diners a subscription plan called

Grubhub+. The subscription costs $9.99 per month plus taxes, and it auto-renews every month

unless consumers cancel.

        59.    To entice subscribers to sign up for Grubhub+, Grubhub touts free delivery—and

in many instances, “unlimited free delivery”—as the key perk. That is misleading: subscribers’

delivery orders are not actually free because Grubhub charges numerous fees, including a service

fee, a small order fee on orders less than $12, and a delivery fee on orders from restaurants that

do not participate in Grubhub+.

        60.    Once Grubhub lures diners into enrolling in Grubhub+, it obstructs their ability to

cancel by failing to provide an easy cancellation mechanism. Grubhub buries the cancellation
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option behind a series of pages in consumers’ account settings that many consumers have

difficulty locating. In contrast to the easy one- or two-click enrollment process, the cancellation

process is difficult and complicated. And as Grubhub is aware, its design has proven successful

in thwarting consumers’ cancellation attempts: it has received numerous consumer complaints

reporting difficulty canceling.

       A.      Grubhub Falsely Promises Free Delivery and Fails to Disclose
               Applicable Fees

       61.     Since launching Grubhub+, Grubhub has prominently promoted free delivery as

the membership’s key feature. After identifying the delivery fee as diners’ “pain point,” Grubhub

focused on attracting diners to its subscription program using the promise of “unlimited free

delivery.”

                i.     Grubhub Advertisements Have Falsely Touted “Unlimited Free
                       Delivery”

       62.     Grubhub widely markets its subscription service online, including on platforms

such as YouTube, TikTok, Facebook, and Instagram. These advertisements feature the promise

of free delivery. For example, in a YouTube advertisement like the one shown below, celebrities

promote “unlimited free delivery” for “thousands of restaurants.”

       Figure 6.




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    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 18 of 66 PageID #:18




       63.     Similarly, some advertisements, like the TikTok one below, emphasize that

Grubhub+ subscribers will never “ever pay for food delivery fees.”

       Figure 7.




       64.     In fact, that is not true. Grubhub charges Grubhub+ subscribers for delivery both

on orders from the many restaurants on its platform that are not part of the Grubhub+ program—

a limitation that Grubhub nowhere discloses—and for orders from all restaurants through its

“service” and “small order” fees.

       65.     Grubhub continued to use deceptive “free delivery” advertisements even after

receiving the FTC’s Civil Investigative Demand in an investigation into the company’s practices.

And although, in some instances, Grubhub added—only after it learned of the investigation—a

vague, inconspicuous statement that “additional fees may apply,” Grubhub hides this information

in tiny font surrounded by brightly colored graphics.

       66.     For example, the following Facebook advertisement features “$0 delivery fees

with Grubhub+” in large, bold text.
                                               18
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 19 of 66 PageID #:19




       Figure 8.




       The phrase “Terms and add’l fees apply” appears below only as an afterthought, in barely

legible text next to a large, distracting image of tacos.

               ii.     Grubhub’s Platform Emphasizes the False Free Delivery Promise

       67.     Consumers lured by the deceptive Grubhub+ advertising are bombarded with

further “free delivery” misrepresentations once they arrive on Grubhub’s platform. Throughout

the meal ordering and checkout process, Grubhub’s mobile application and website flood diners

with content reinforcing the impression in the advertisements—that Grubhub+ subscribers

receive free delivery. For example, as shown in the screenshot below, the top of the home screen

on the Grubhub application features a Grubhub+ banner that encourages diners to sign up to

“Unlock $0 delivery fees.”




                                                  19
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 20 of 66 PageID #:20




       Figure 9.




       68.    Similarly, on the restaurant search results page at the start of a consumer’s

ordering process, many restaurant listings—like those pictured below—have featured a

crossed-out delivery fee that is replaced with “$0 with GH+,” conveying that the subscriber will

not be charged anything beyond the cost of the food.

       Figure 10.




       69.    Grubhub continues to market the subscription plan at checkout, when a diner has

finished selecting menu items and is close to placing the order. Grubhub shows the potential


                                               20
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 21 of 66 PageID #:21




savings on the particular order, displaying a large purple button encouraging diners to save

money by enrolling in Grubhub+.

       70.     Clicking the button reveals a pop-up window screen like the one shown below in

Figure 11, which features “$0 delivery fees” and allows diners to subscribe with a single click.

The consumer’s payment information is pre-populated in the pop-up, and below that is a large

yellow button labeled “Try 30 days free” that automatically enrolls consumers in Grubhub+ upon

clicking. The pop-up features “$0 delivery fees” as the key feature of the subscription.

       Figure 11.




       71.     Many of the pop-up windows do not include any reference to other fees at all.

Even those that do, however, like the example above, never tell consumers that Grubhub will

charge a substantial fee on the vast majority of orders despite Grubhub’s “free delivery”
                                                21
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 22 of 66 PageID #:22




promises. Nor do they reveal that Grubhub will charge a fee on all orders below a $12 threshold,

so those orders are also not “free.”

       72.     Grubhub thus broadcasts a simple message: for $9.99 per month, Grubhub+

subscribers will receive unlimited free delivery. Using this strategy, Grubhub lures consumers

into its auto-renew subscription plan to—in Grubhub’s words—“lock them in” to its platform.

               iii.    Grubhub+ Subscribers Have Been Misled by Deceptive Promises of
                       Free Delivery

       73.     Consumers persuaded by the promise of free delivery subscribe to Grubhub+ and

then are surprised to discover they are still charged for delivery in the form of other fees

described above. In addition, some subscribers are unexpectedly charged a “delivery fee” at

checkout, because they ordered from a restaurant that is not eligible for Grubhub+—a condition

that Grubhub also conceals. A July 2020 Grubhub strategy document specifically highlighted

restaurant selection as a top reason for Grubhub+ cancellations, with consumers reporting that “I

didn’t realize how few of the GH restaurants in my area were GH+,” and “it should be stated that

the free delivery is for a select amount of restaurants.” By around August 2021, for example,

only 60% of the restaurants on the platform participated in Grubhub+.

       74.     As Grubhub knows, many subscribers believe its promises of free delivery. It has

regularly received complaints from subscribers who had expected “free delivery” to mean that

Grubhub would charge no fees whatsoever on delivery orders. And an August 2020 customer

service analysis recognized that Grubhub+ subscribers remained unaware of what Grubhub

described internally as the “restrictions of the free delivery benefit.”

       75.     Unless diners carefully scrutinize the checkout page or their receipts, they may

never realize that their “free delivery” benefit is illusory. Many subscribers who eventually

discover the hidden costs contact Grubhub’s customer service to report the fees, which they

believe to be in error. Frustrated diners report: “I keep getting charged service fees of 1-5 dollars
                                                  22
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per order. Is this a mistake?”; “Why is there a service fee? I have Grubhub+”; “Why am I still

paying a ‘service fee’ if I pay for grubhub+?”; “I thought as a grubhub+ member, there were no

fees”; and “So grub hub just changed the name of the delivery fee? Why exactly am I paying for

seamless plus then?”

       76.     Grubhub designed its subscription program to bait consumers with claims of “free

delivery” while making up for lost revenue by assessing undisclosed fees. Those fees help

Grubhub “control the cost” of the subscription program and protect profitability. Grubhub’s

then-Senior Vice President of Growth admitted that this practice “[f]eels bad.”

       77.     Grubhub knows that its marketing tactics have misled subscribers about the

benefits of Grubhub+, but it continues to falsely promise “free delivery.”

       B.      Grubhub+ Enrollment Is Fast and Easy, While Cancellation Is Clunky and
               Difficult

       78.     Grubhub has designed the Grubhub+ enrollment process to be fast, convenient,

and straightforward. The signup pages are everywhere—every page in the meal ordering flow

includes promotional banners or advertisements from which consumers can enroll in Grubhub+

with a single click in a pop-up window; they need not even navigate away from the meal

ordering or checkout page to do so.

       79.     By contrast, Grubhub’s cancellation process is more complex, clunky, and

difficult than the easily accessible, one- or two-click Grubhub+ enrollment process. Cancellation

requires the consumer to navigate to a designated page and complete a multi-page, multi-click

process.

       80.     A typical cancellation process proceeds as follows. First, the diner must click the

“Grubhub+ membership” option on the “Account” page. That membership page, shown below,

contains no option to cancel. Instead, it lists the various benefits of Grubhub+, through which the

consumer must scroll to reach the “Manage membership” button at the bottom of the page.
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Buried below this button, in hard-to-read text, is a statement that the consumer will be charged

$9.99 plus tax on a certain date.

       Figure 12.




       81.     This inconspicuous statement is also the only place where Grubhub reports the

subscription’s billing date, which does not even mention the deadline to cancel and avoid the

next month’s charge. That makes it difficult for diners to take the very first step in canceling—

determining the date by which to do it.

       82.     Once diners have figured out when to cancel, have found the Account page, and

have clicked the “Grubhub+ membership” option, they must click on the “Manage membership”

button. That reveals the page shown below, which provides two options, one of which is “Cancel

membership.”



                                                24
Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 25 of 66 PageID #:25




  Figure 13.




                                    25
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 26 of 66 PageID #:26




       83.     But clicking “Cancel membership” here still does not terminate the membership.

Instead, Grubhub presents the consumer with another screen, shown below, featuring a bulleted

list of Grubhub+ subscription benefits and two more options: “Keep membership” and “Cancel

membership.”

       Figure 14.




       84.     Clicking “Cancel membership” on this screen again does not actually terminate

the subscription. Grubhub forces the diner through yet another screen, shown below, offering a

$15 credit to stay subscribed. The button to “Stay and get $15” is highlighted in bright yellow,

above a muted “Cancel membership” button. Only by clicking on this “Cancel membership”

button can a consumer finally terminate the subscription. That means the consumer has to click a

“cancel” button at least three times.



                                                26
    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 27 of 66 PageID #:27




       Figure 15.




       85.     While the Grubhub+ enrollment process can be completed in one or two clicks

from nearly anywhere in the diner’s account or anytime during the ordering flow, Grubhub hides

the cancellation option behind a multi-page, six-click flow that many consumers have difficulty

locating.

       86.     Grubhub has received numerous consumer complaints about the difficulty

canceling Grubhub+ subscriptions, including reports that “I keep getting charged . . . I do not see

an option to cancel on my end”; “I can’t find where to discontinue . . . I believe was charged last

month as well but I still couldn’t find where to do it”; and “Can you please help me cancel my

membership to grubhub+[.] I can not find account settings. I can not find grubhub+

membership.”



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       Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 28 of 66 PageID #:28




         87.   Grubhub is aware that this complex cancellation process obstructs consumers’

attempts to terminate their subscriptions. Indeed, a company slide deck reporting customer

service complaints about Grubhub+ highlighted one subscriber who pleaded: “PLEASE cancel

this membership. I have been trying to cancel. No link found to cancel at ALL!” Despite this

awareness, Grubhub has not modified the cancellation process to address these issues.

III.     Grubhub Locks Consumers’ Gift Card Balances

         88.   For years, Grubhub has employed a fraud detection system that has blocked

diners from completing orders and sequestered their gift card balances. While many companies

have fraud detection systems, in Grubhub’s case, the company has frozen diner accounts

containing large gift card amounts without notifying those diners or restoring access to those

funds, even when consumers complain or verify that they are not fraudsters. This practice has

deprived many bona fide diners of their gift card balances, which have ranged from tens to

thousands of dollars—and has allowed Grubhub to pocket money received from the purchasers

of those gift cards, without giving consumers anything of value in exchange. Moreover, it has

left many diners—including Grubhub+ subscribers paying $9.99 per month—unable to use their

accounts to complete delivery orders.

         A.    Grubhub Blocks Diners’ Accounts Without Notice or Explanation

         89.   Grubhub sells gift cards on its own website and through third-party retailers.

         90.   Often, people who receive Grubhub gift cards are experiencing significant, and

often difficult, life events. These individuals—who may be undergoing surgery or experiencing

an illness, childbirth, or the death of a loved one—often receive meal delivery gift cards from

family and friends to support them during this stressful time, when they may have no ability to

cook for themselves. These recipients may therefore load hundreds, and sometimes thousands of




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dollars in gift cards onto a Grubhub account. Many of these consumers have never used Grubhub

before, but they sign up for a new account just so they can use these gift cards.

        91.     To use gift cards, diners must “load” them into their accounts by adding the gift

cards as a payment method. Diners can do that easily. When they attempt to pay for their orders

using their gift cards, however, many find that Grubhub will not process their orders or will

cancel orders after they are placed. Unbeknownst to them, Grubhub has blocked their accounts,

because Grubhub often views the sudden loading of large gift card balances, or the use of gift

cards by a new account holder, as suspicious.

        92.     Any fraud detection system will produce false positives, but bona fide consumers

falsely flagged for fraud can generally verify their legitimacy when given the opportunity to do

so. But Grubhub denies its customers that opportunity: it provides no notice to consumers, no

way to unblock an account, and no way for bona fide gift card holders to get their money back

from the company.

        93.     Diners may discover a problem with their accounts in two ways. They may

complete an order with a gift card, but subsequently receive a cancellation email or see the

cancellation in their order history. Alternatively, Grubhub may immediately reject the order as

soon as it is placed, telling diners that “your order cannot be processed at this time,” and that

they should contact the restaurant directly—not Grubhub—to place an order. In addition to

canceling or rejecting those original orders, Grubhub also blocks the diners’ accounts, meaning

that it rejects or automatically cancels all future orders.

        94.     At each step, Grubhub neither tells diners why they are unable to place an order,

nor directs diners to contact Grubhub for further information.

        95.     Diners, for their part, do not understand what happened. Grubhub continues to

allow them to access their accounts, which look the same: they can still log in, browse

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restaurants, and add menu items to their bags as they usually would. But they can no longer

complete any orders, and Grubhub does not explain why. Diners are left with unusable gift card

balances, often worth hundreds or thousands of dollars, that are simply trapped in their accounts.

       96.     Worse still, Grubhub does not warn blocked diners not to add more gift cards to

their accounts or tell them these new funds will also be unusable. Sometimes consumers think

the reason they cannot place an order is because there is a problem with their current gift cards or

other payment methods, so they load even more gift cards onto their account while it is blocked.

Grubhub allows this, knowing full well that the funds will be frozen.

       97.     On top of that, diners spend significant time placing additional orders, sometimes

from a different restaurant or with a different payment method, trying to avoid what they believe

to be a technical glitch or payment error. One consumer who received a $500 gift card following

surgery for a double mastectomy reported that she attempted to place six orders in a week, all of

which were cancelled. She is far from alone: a Grubhub customer service document from 2021

reports that diners in this situation often try unsuccessfully to place multiple orders.

       B.      Grubhub Gives Consumers the Runaround

       98.     Frustrated consumers who cannot place orders or use their gift card balances often

turn to Grubhub’s customer service department for help. Many of these consumers are already

dealing with stressful life events and are desperate to resolve the issue quickly.

       99.     In one tragic example, a consumer received over $6,000 in Grubhub gift cards

after her son passed away. After Grubhub rejected all of her orders and blocked her account, the

grieving mother told customer service that her children would not be able to eat dinner that

evening unless Grubhub resolved the problem, but the representative failed to do so. Two days

later, the mother contacted customer service again, reporting that Grubhub had again rejected her

gift card orders ten times. The agent responded that she was working to “improve the service”


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and would send a report to the appropriate team. The consumer contacted Grubhub three times,

during which the problem was not resolved.

        100.    This consumer’s experience is typical. Indeed, an April 2022 internal document

acknowledges that, when a diner’s account is blocked for suspicious behavior, Grubhub does not

tell diners or even its own customer service agents “that future orders will no longer be accepted”

from the diner’s account—nor, indeed, does it provide any communication to the diner or any

information to its customer service agents about the issue. The document also admits that this

policy leads to customer dissatisfaction, increased complaint resolution time, and “repetitive

contacts” by the consumer.

        101.    Diners who press for more information are often told the account is temporarily

on hold for their “protection,” or that the issue will be “escalated” to Grubhub’s fraud team,

which will reach out to them in 24-48 hours. That, too, is a lie—Grubhub rarely gets back in

touch. This cycle often repeats many times: diners contact customer service a second, third, or

fourth time; Grubhub tells them there is no new information and does not allow them to speak to

a supervisor or anyone else; and customer service agents repeat that someone will call back in

24-48 hours, but no one ever does.

        102.    In the unusual instance where Grubhub does unblock an account, diners are often

able to place just one order using a gift card before finding themselves blocked again. These

diners are then forced back into the cycle of repeatedly contacting customer service and never

hearing back. Some diners, frustrated and exhausted, give up before they can use the full value of

their gift cards.

        103.    Bona fide recipients of multiple or large gift cards unfortunately bear the brunt of

Grubhub’s endless customer service loop. One consumer whose family of six became ill with

COVID-19 could use a $500 gift card only once before Grubhub blocked her account. Grubhub

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promised that someone would reach out within 48 hours to help, but no one ever did. Because

they could not get any food delivered for over seven days, they had to ask other people to bring

them food. Yet another consumer, who was staying near a cancer center while her husband was

receiving radiation treatment, could only use her $300 gift card once before she was blocked.

Grubhub purported to “escalate” her issue and repeated the same empty promises of hearing back

within 48 hours. The consumer reported that the experience was “extremely extremely

frustrating in an already vulnerable situation.” Similar sad stories abound.

       C.      Stressed Consumers Lose Money and Time

       104.    Diners with blocked accounts often lose their gift card balances, which are

frequently worth hundreds or thousands of dollars. An internal customer service document

showed that, in 2021, more than 97% of blocked diners during one particular month were never

unblocked, meaning that those diners were permanently denied the use of their gift cards. In such

cases, Grubhub provides no benefit to the owners of those gift cards, but nevertheless keeps the

money that friends or family originally paid to purchase the cards. Grubhub therefore has little

financial incentive to fix the problem.

       105.    Grubhub routinely refuses to refund diners for blocked gift card funds or allow

diners to transfer the gift cards to use in a different, unblocked account. Indeed, Grubhub

explicitly prohibits customer service agents from “unlinking” a loaded gift card in a blocked

account (or any other account) under any circumstances, or from asking supervisors to do so.

And, as mentioned earlier, Grubhub permits blocked account holders to add additional gift cards

without warning them the money will be lost.

       106.    On top of appropriating their gift card funds, Grubhub also prevents blocked

account holders from accessing other benefits. For example, diners who are paying for a

Grubhub+ subscription continue to be charged for the service, despite their inability to place any


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orders while their account is blocked. Similarly, Grubhub continues to run the clock on

Grubhub+ free trial memberships while an account is blocked. Diners also lose out on expiring

credits, like promotions and meal credits, while their accounts are blocked. The result is that

consumers with blocked accounts must continue to pay for services Grubhub prohibits them

from using. In addition, consumers waste time and energy, and suffer significant stress dealing

with their accounts, commonly without success, and often on top of already taxing life

circumstances.

        107.     Since at least 2019, Grubhub has received numerous complaints about consumers’

inability to use their gift card balances and other benefits, but it has not fixed these issues. A

2021 Grubhub document highlights blocked accounts and unusable gift cards as the category

with the most complaints to the Better Business Bureau. Similarly, blocked accounts remain one

of the largest internal complaint categories. In June 2022 alone, nearly 7,000 diners reported

suffering from blocked accounts, resulting in more than 11,000 customer service contacts.

        108.     Because Grubhub has not taken steps to address the issue, diners continue to

complain about Grubhub’s “unilateral restriction and lack of notification” about blocked

accounts, and its “effective theft of funds.” Consumers cannot reasonably avoid these harms

because Grubhub does not tell them that they have been blocked; why they have been blocked; or

what, if anything, they can do to restore their accounts and access their gift card funds again.

These harms to consumers outweigh any purported benefit.

IV.     Grubhub Falsely Represents an Affiliation with Restaurants Without Their
        Permission, Damaging Their Revenues and Reputation

        109.     Grubhub places on its platform Unaffiliated Restaurants that have not given

Grubhub permission to be listed and that have not allowed Grubhub to take diners’ orders and

deliver food on their behalf. In most cases, the restaurants do not even know Grubhub has added



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them to its offerings. Similarly, Grubhub does not tell diners which restaurants on its platform

are unaffiliated.

        110.    By falsely representing an affiliation with these restaurants, Grubhub boosts its

own offerings, expands its scale, and fuels its business—but at significant cost to the restaurants

that have not consented to a partnership with Grubhub.

        111.    In particular, Grubhub’s practices harm the Unaffiliated Restaurants by diverting

business away from the restaurants’ own delivery services. The restaurants’ reputations also

suffer, because the lack of an affiliation between Grubhub and the restaurant often results in a

bad experience for diners, such as inaccurate orders and slow deliveries. Although these

problems are entirely Grubhub’s fault, the diners end up blaming the Unaffiliated Restaurants,

which ultimately lose business. When thousands of restaurants complained to Grubhub and

demanded to be removed from the platform, Grubhub attempted to coerce them into signing a

paid contract instead.

        112.    In addition, distinct features of platform markets incentivize platforms to rapidly

increase scale. Digital platforms, like Grubhub, that enable interactions between distinct users on

the platform benefit from network effects. An increased number of restaurant listings increases

the appeal of platform to customers, and an increased number of customers increases the appeal

of the platform to restaurants. Such network effects can confer a powerful incumbency advantage

on a platform that can get to scale quickly, creating barriers to entry and competition.

        113.    These features of digital markets can mean that firms that achieve the necessary

scale to take off can experience accelerated growth. This type of accelerated growth, whether

achieved through fair or unfair methods of competition, can create a formidable advantage,

effectively blocking off the market to competition.




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       A.      Grubhub Adds Restaurants Without Their Knowledge or Consent to
               Artificially Boost Supply

       114.    In the food-delivery business, companies are incentivized to increase the number

of restaurants on their platforms to draw more diners. Diners will often decide which delivery

service to use based on the number of available options. A larger restaurant supply ensures that a

diner’s particular choice—her favorite diner, the Thai restaurant she feels like ordering from that

evening, the pizza place her kids request on Friday night—is available. Boosting the number of

offerings is thus critical to attracting diners and growing market share.

       115.    In early 2019, Grubhub executives directed the addition of Unaffiliated

Restaurants, considering them a critical part of the company’s business strategy. A former

executive sent other members of the management team and employees a whiteboard drawing of

things “that I really really really really want,” telling them that “I will bug you every Friday to

email your progress and milestones” on these projects. One of those included the “expansion” of

Unaffiliated Restaurant delivery.

       116.    Under that directive, Grubhub’s Unaffiliated Restaurants grew to more than

325,000 at its peak, and accounted for between 20% and 53% of Grubhub’s total restaurant

listings from 2019 to 2022. Grubhub determined that Unaffiliated Restaurants led to “massive

growth everywhere” and was a successful “mechanism to gain national scale.” In Chicago, for

instance, Grubhub reported that it had “added substantially all [Unaffiliated Restaurant]

inventory currently available” by 2020, becoming “the #1 delivery provider in Chicago” in terms

of restaurant supply.

       117.    Similarly, by early 2020, Grubhub’s restaurant supply surpassed DoorDash’s—a

major competitor—as a result of its rapid addition of Unaffiliated Restaurants. By that time, too,

the number of Unaffiliated Restaurants exceeded the number of contracted restaurants on

Grubhub’s platform.
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        118.    Grubhub executives boasted about these results in a February 2020 shareholder

letter. They told investors that Grubhub more than doubled its restaurant inventory in only three

months by the “rapid addition” of 150,000 Unaffiliated Restaurants.

        B.      Grubhub’s Chaotic Ordering Process Harms Unaffiliated Restaurants

        119.    Grubhub’s addition of Unaffiliated Restaurants led to a dramatic increase in its

restaurant supply, but it also caused considerable harm to the affected restaurants.

        120.    First, diners place orders through the Grubhub platform when they otherwise may

have ordered directly from the restaurant itself—diverting business away from the restaurant’s

own delivery business and own delivery drivers. In fact, Grubhub’s Unaffiliated Restaurant

listings typically show up as advertisements at the top of the Google search page, above the

restaurant’s own listing. As a result, diners searching for the restaurant are first directed to a link

to order delivery through Grubhub—not through the restaurant itself.

        121.    On top of that, Grubhub’s fulfillment process for Unaffiliated Restaurants causes

numerous problems that ultimately affect the restaurants’ bottom line. For a contracted

restaurant, a diner will place an order and make the payment on Grubhub’s desktop or mobile

site; that order will automatically be sent to the restaurant to fulfill, and to the driver to deliver.

        122.    By contrast, because Unaffiliated Restaurants do not have ordering systems that

are integrated with Grubhub, the ordering process is more difficult and time consuming. For

those orders, Grubhub sends the diner’s order to the delivery driver, who then must separately,

and manually, place the real order—either by calling the restaurant or placing an order on the

restaurant’s website.

        123.    Once at the restaurant, the driver must pay using a Grubhub card. Sometimes, the

Grubhub cards have insufficient funds or are otherwise declined; other times, the driver

discovers that the restaurant is cash only. Drivers are not allowed to use a different payment


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    Case: 1:24-cv-12923 Document #: 1 Filed: 12/17/24 Page 37 of 66 PageID #:37




method, because Grubhub will not reimburse them later. When problems like these arise,

Grubhub provides no real-time troubleshooting to help drivers deal with payment problems, as it

does when drivers experience issues with orders from affiliated restaurants.

       124.    In these instances, the Unaffiliated Restaurant, which has already prepared the

food, does not get paid. The restaurant must either let the food go to waste, or turn the food over

without receiving payment to prevent complaints from disgruntled diners.

       125.    Indeed, Unaffiliated Restaurants often lose business because consumers are

unhappy with their experience ordering through Grubhub. Because Grubhub does not have

relationships with the restaurants, it must cobble together restaurant information—such as hours

of operation, addresses, menu items, menu prices, and delivery times—from third-party sources.

Grubhub does not manually validate this information for accuracy.

       126.    These inaccuracies often create serious problems. A driver who calls an

Unaffiliated Restaurant to place a diner’s order may discover it is actually closed, or the ordered

items are unavailable, or the listed prices are incorrect. In many instances, Grubhub may not

inform diners of these problems or help diners resolve them, simply canceling the diner’s order

instead.

       127.    Orders from Unaffiliated Restaurants also take longer to place and deliver

because of the roundabout ordering process described above. And because Grubhub’s listed

delivery times are often incorrect, they set unrealistic expectations and increase customer

complaints.

       128.    Grubhub’s diner-facing platform does not distinguish between affiliated and

Unaffiliated Restaurants, so frustrated diners do not know that Unaffiliated Restaurants did not

consent to being on Grubhub. As a result, they attribute their bad experiences to the restaurants,

rather than Grubhub. They complain to the restaurants and leave negative reviews on Google,

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Yelp, and other websites, damaging the restaurants’ reputations. Ultimately, they stop ordering

from the Unaffiliated Restaurants.

       129.    Grubhub also charges larger diner fees for orders from Unaffiliated Restaurants,

to compensate for the higher costs of fulfilling these orders and because it earns no commissions

from Unaffiliated Restaurants. In early 2020, for example, diners paid an average of $3.87 to

$5.56 in fees for an order from a partner restaurant, compared to $10.99 from an Unaffiliated

Restaurant. Diners thus pay more for their meal than if they had ordered from the Unaffiliated

Restaurant directly, from a competitor food-delivery platform with which the Unaffiliated

Restaurant has actually contracted, or from a different restaurant with which Grubhub had

contracted.

       130.    Grubhub’s Unaffiliated Restaurant practices negatively affect other parties, too.

Orders from these restaurants require more effort from drivers, who must manually place the

diner’s order and make the payment. Drivers also have to deal with frustrated diners when the

order is wrong or delayed. Grubhub’s partner restaurants also lose business to Unaffiliated

Restaurants, which are listed on the same platform but are not paying Grubhub commissions.

       C.      When Unaffiliated Restaurants Request Removal, Grubhub Pressures Them
               To Sign Contracts Instead

       131.    Unaffiliated Restaurants complain to Grubhub when they discover the company

has listed them without their consent. To be removed, they must go through a difficult, lengthy,

and opaque process, and often succeed only with incessant follow up.

       132.    Grubhub not only jeopardizes the reputations and threatens the businesses of

Unaffiliated Restaurants, but also attempts to coerce Unaffiliated Restaurants to enter into paid

contracts. When an Unaffiliated Restaurant contacts Grubhub about removal, customer service

agents are required to transfer the call to the sales team, which warns that the restaurant could

lose any business it has gained on the platform. As stated in a marketing plan, Grubhub’s goal is
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“to get [Unaffiliated Restaurants] hooked on the incremental online business, and then negotiate

with them to sign a traditional contract.” In fact, Grubhub may even give Unaffiliated

Restaurants an artificial boost—in the form of higher rankings and greater visibility—to drive up

demand and help make the sale.

       133.    Other times, Grubhub simply ignores an Unaffiliated Restaurant’s removal

requests. Restaurants complain to Grubhub for months, or years, before Grubhub takes any

action. In one case, a restaurant requested removal for over three years, to no avail. The

restaurant finally complained directly to a Grubhub executive that the company was destroying

the integrity of its food and reputation, because Grubhub’s drivers did not have the proper

containers to transport its food, could not answer diners’ questions, and made delayed deliveries

of lukewarm and soggy food. In an effort to stop the Grubhub orders, this restaurant even

blocked its systems from accepting Grubhub credit cards. Unfortunately, this restaurant’s

experience is all too common.

       134.    Grubhub often does not remove Unaffiliated Restaurants until there is serious

pressure to do so, such as when the restaurants threaten legal action. Thousands of Unaffiliated

Restaurants have sent cease-and-desist letters to Grubhub, complaining that they have repeatedly

requested removal without success.

       135.    In other instances, restaurants have turned to the press. In one case, a reporter

informed Grubhub that the local news station would be airing a story about Grubhub’s

unauthorized orders. As Grubhub scrambled to remove the listings before the story aired, its

employees acknowledged internally that Grubhub had never responded when one of the

restaurants had emailed to be removed.

       136.    In another case, Grubhub reached out to some Unaffiliated Restaurants only after

it learned that the New York Post would be running a similar story. Grubhub admitted that the

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goal of this outreach was to be able to tell the Post that it was actively responding to the

restaurants’ requests.

       137.    In yet another example, a reporter from Eater told Grubhub that he was doing a

story about how the company was “impersonating a restaurant.” Grubhub removed the restaurant

in three hours, noting that “this situation risks spiraling badly” and that the restaurant owner has

“a good argument to make.”

       138.    Grubhub thus calibrates its removal process to have the right amount of “friction”

so that it can keep the Unaffiliated Restaurants—either by ignoring their removal requests or

converting them to partner restaurants. As a Grubhub employee summed up: “Not good

necessarily but the company goal was supply.”

       D.      Grubhub Has Continued Its Unaffiliated Restaurant Practices Despite
               Repeated Complaints

       139.    As top executives have acknowledged, Grubhub’s Unaffiliated Restaurant

practices are bad for consumers, but they are an easy way to grow the business. And Grubhub

does not even try to keep the problems a secret. In the fall of 2019—around the time Grubhub

first began adding Unaffiliated Restaurants—executives already knew these practices were

troublesome, freely admitting in a shareholder letter that “we believe [Unaffiliated Restaurant]

options are the wrong long-term answer for diners, restaurants, and shareholders.” The practices,

they acknowledge, create a “suboptimal” experience. Yet Grubhub would continue apace, the

letter explained, because Unaffiliated Restaurants were an “extremely efficient and cheap” way

to boost restaurant inventory, and would help Grubhub quickly double its restaurant supply—and

fuel its growth.

       140.    Internally, a former executive also acknowledged continuing concerns about the

“poor” quality of service for Unaffiliated Restaurants, noting that “[w]e are literally doubling the

restaurant inventory diners see with almost no planning/analysis.” He asked his team: “Should
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we be warning [diners] the experience will be different? More expensive? Longer ETA because

they are ‘different’? Right now, I am pretty sure people don’t see the massive fees until

checkout.”

       141.    Employee grievances about Unaffiliated Restaurants also multiplied. In one

document, an employee warned that practices around Unaffiliated Restaurants “are terrible

because [restaurants] have zero control over their brand or user experience. I don’t think this

option should be something we offer to restaurants, ever.”

       142.    Grubhub also audits its Unaffiliated Restaurants to track the causes of customer

complaints and order cancellations. The audits revealed that Unaffiliated Restaurants often refuse

to fulfill an order when they learn that it is coming from Grubhub. The restaurants do not want to

work with Grubhub, or they suspect a scam.

       143.    Rather than fix these problems, Grubhub instead took steps to make its practices

difficult for diners and restaurants to detect. Grubhub still does not disclose to diners when they

are ordering from an Unaffiliated Restaurant or warn that those orders may be subject to higher

fees, delays, or order problems.

       144.    Grubhub also goes to great lengths to hide its involvement from Unaffiliated

Restaurants. It directs drivers to place orders under the diner’s name and then to impersonate the

diner at the restaurant. A former executive also discussed with employees other strategies to

remain undetected, such as telling drivers to leave their Grubhub thermal bags outside during

pickups from Unaffiliated Restaurants.

       145.    Grubhub also conceals its tactics when adding Unaffiliated Restaurants to its

online listings. It tries to “be as close to unnoticed as possible until the volume gets super

material,” when Grubhub can use that order volume to pressure restaurants to partner with the

company.

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       146.    Similarly, Grubhub avoids adding Unaffiliated Restaurants that might resist or

vocalize their concerns. In one instance, an employee advised not to add Texas Roadhouse,

which had previously sent Grubhub a cease-and-desist letter. The employee also asked whether

Long John Silver’s, Ruth’s Chris, and Dairy Queen had “cooled off” long enough to be added

back on the platform. And another employee concluded that Grubhub should be fine adding a

few other chains with whom Grubhub has had “no active discussions.”

       147.    Despite these well-documented harms, Grubhub continues listing Unaffiliated

Restaurants without their knowledge and consent and has indicated no plans to stop the practice.

Restaurants cannot reasonably avoid these harms because Grubhub adds them in secret and does

not comply when the restaurants ask to be removed. These harms to consumers and competition

outweigh any countervailing benefits, which Grubhub has conceded are nearly nonexistent.

Indeed, the only benefit is to Grubhub, which can add restaurant supply quickly and cheaply.

V.     Grubhub Has Misled Drivers About How Much They Will Earn

       148.    Grubhub requires hundreds of thousands of drivers to carry out its delivery

services. As another part of the company’s underhanded growth strategy, Grubhub has lured

people into signing up by promising they can earn enticing hourly rates, like $26 per hour, while

working flexible hours and part-time schedules. In reality, however, drivers earn far less. In

2023, only approximately the top 2% of Grubhub drivers typically earned the advertised amount,

and the median earnings were only about $11 per hour.

       A.      Overview of Grubhub’s Gig System

       149.    Grubhub relies on gig workers to meet the demands of its millions of diners,

enlisting over 200,000 delivery drivers across the country at any given time.

       150.    Grubhub treats its gig workers as independent contractors who are not entitled to

the benefits enjoyed by traditional employees, such as salaries, benefits, regular work schedules,


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or the protection of employment and labor laws. Drivers must also supply their own cars,

insurance, and gas at their own expense. This arrangement saves Grubhub significant labor costs

by allowing it to quickly add or shed drivers to meet customer demand and to avoid paying

drivers for any time they are not actively on a delivery route. Grubhub actively targets people

who may be attracted to non-traditional or seasonal work schedules, such as college students and

small business owners.

       151.    When Grubhub drivers work a shift, they log into Grubhub’s mobile application

and toggle themselves “on,” which indicates they are available to accept deliveries.

       152.    Once a driver has toggled “on,” the Grubhub application may send them an offer

for a delivery accompanied by the total payment for completing it. The driver can then decide to

accept or decline that offer. It is difficult to predict exactly when or how many offers will come

in; drivers can wait for hours without receiving a single offer, or they can get a string of offers

with little or no waiting time in between. When they are done driving, they toggle “off.”

       153.    Drivers can work on an ad hoc basis by toggling “on” and “off” whenever they

want. Or they can sign up in advance for scheduled “blocks” for set periods of time (for example,

12-2 p.m. on Friday), and then log in during those specified blocks.

       154.    Grubhub generally pays its drivers on a per-delivery basis. Broadly speaking, the

total delivery pay consists of three main components (in addition to some optional, ad hoc

components): mileage, time spent on the road, and tips.

       155.    The mileage accounts for the total distance driving to the restaurant to pick up the

order and then to the diner to drop off the order. The time accounts for how long it takes to drive

to the restaurant, wait for the order, and then drive to the diner. The mileage and time

components are based on estimates Grubhub makes at the time it sends the offer to the driver. If




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the actual mileage and time end up being higher than the estimate, the driver is generally not

compensated for the extra work.

       156.    Tips, the third component, are paid by the diner. Most drivers report that tips

make up 40-60% of their pay. That means that diners—not Grubhub—pay nearly half or more of

a driver’s earnings.

       B.      Grubhub Has Made Unsubstantiated Earnings Claims

       157.    To entice people to sign up as Grubhub drivers, Grubhub has disseminated

advertisements that falsely promise consumers will earn a certain hourly rate, which varies

depending on the location. The advertised hourly rate is high—often more than double the

jurisdiction’s minimum wage. For instance, in January 2023, Grubhub touted on Facebook that

workers can “Earn up to $40 per hour as a Grubhub delivery driver in New York City!”

       Figure 16.




       158.    Similarly, in August 2022, it advertised on Facebook and Instagram: “Want to

earn up to $26/hr delivering food around Denver?”



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      Figure 17.




      159.   And in April 2023, it advertised on Google: “Up to $26 Hourly – Earn Money in

Chicago.”

      Figure 18.




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       160.    Grubhub’s advertisements provide no clarification or qualification of the hourly

earnings claim.

       161.    Grubhub has placed these advertisements on search engines like Google and

Bing; social media sites like Facebook, Instagram, TikTok, and Snapchat; and job boards like

Craigslist. The company has spent hundreds of thousands of dollars on these advertisements,

which have generated significant clicks and impressions. Since at least 2019, Grubhub regularly

ran these hourly earnings advertisements in thousands of markets across the United States.

       162.    The represented hourly earnings in these advertisements are material to a

consumer’s decision to become a Grubhub delivery driver. Nearly half of Grubhub’s drivers rely

on the company as their full-time income source. Internal Grubhub analyses reiterate that

“earning potential is repeatedly identified as the fundamental concern drivers have with

Grubhub,” over other purported benefits such as flexibility. Similarly, company studies confirm

that the “most motivating” reason for becoming a driver is the ability to make money.

       163.    Grubhub’s inflated hourly earnings advertisements attracted a surge of drivers:

when the advertisements started running in 2019, they led to a 398% increase in driver leads and

a 278% jump in the rate at which drivers click on the advertisement, reducing Grubhub’s

marketing costs by 79% per lead.

       164.    Grubhub’s hourly earnings claims in these advertisements, however, are false or

unsubstantiated. According to Grubhub’s own data, the actual earnings for Grubhub drivers fall

well below the advertised hourly rate. With respect to the January 2023 advertisement about

earning “up to $40 per hour” in New York City, for example, the median earnings of a Grubhub

driver in New York City at that time were only $10 per hour. In addition, only 0.1% of New

York City drivers made the claimed $40 per hour during that time period.




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       165.   Similarly, when Grubhub advertised in April 2023 that Chicago drivers could earn

“Up to $26 Hourly,” that was not true, either. The median earnings of a Chicago driver were only

$11 per hour, and only 1.3% of drivers earned the promised $26 per hour.

       166.   Similar claims that Grubhub has made in other parts of the country also are

unsubstantiated. The chart below shows a sample of the advertised hourly earnings in some of

Grubhub’s core markets, compared to the actual median earnings:

       Table 1.

                                                                               Percent of
                                                               Median          Drivers
                                             Advertised        Actual          Earning
 Date of                                     Hourly            Hourly          Advertised
 Advertisement             Location          Earnings          Earnings        Amount
 January - August 2022     Baltimore         $25               $14             2.2%
 January - August 2022     Boston            $26               $18             5.4%
 January - August 2022     Chicago           $26               $15             1.9%
 January - August 2022     Denver            $26               $17             3.7%
 January - August 2022     New York City     $26               $12             1.3%
 January - August 2022     Philadelphia      $24               $13             3.6%
 January - August 2022     Portland          $24               $18             7.3%
 August 2022               Baltimore         $25               $13             2.1%
 August 2022               Boston            $26               $17             5.9%
 August 2022               Chicago           $25               $13             1.7%
 August 2022               Denver            $26               $17             2.3%
 August 2022               New York City     $26               $10             1.5%
 August 2022               Philadelphia      $24               $12             4.4%
 August 2022               Portland          $24               $17             8.6%
 January 2023              New York City     $40               $10             0.1%
 February 2023             Boston            $26               $13             3.5%
 February 2023             Denver            $26               $14             2.3%
 February 2023             National          $26               $11             1.9%
 February 2023             New York City     $26               $10             1.5%
 April 2023                Chicago           $26               $11             1.3%

       167.   This table shows that only around the top 2% of drivers earn Grubhub’s

advertised hourly rate. At best, that figure is about 9% in these examples. Because Grubhub


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closely tracks the amounts it pays drivers, it knows that most drivers make substantially less than

the advertised amounts. Despite knowing from its own data that the vast majority of delivery

drivers were not making anywhere near the claimed hourly rates, Grubhub continued to run

advertisements with unsubstantiated hourly earnings claims.

       168.     Due to the disconnect between Grubhub’s representations and drivers’ actual

earnings, drivers quickly leave Grubhub. Internal analyses show that Grubhub loses 50% of its

driver population every 7-8 months. This high driver churn rate places even greater pressure on

Grubhub’s marketing efforts to recruit new drivers.

       C.       FTC Sends Grubhub Notice of Penalty Offenses

       169.     In October 2021, the FTC sent Grubhub a letter that included a copy of the Notice

of Penalty Offenses Concerning Money-Making Opportunities. Grubhub received this letter on

October 27, 2021. The letter and Notice of Penalty Offenses identified specific acts or practices

that the Commission has determined are unfair or deceptive and violate Section 5 of the FTC

Act, 15 U.S.C. § 45.

       170.     As detailed in the Notice enclosed with the letter, the Commission determined in a

series of litigated decisions that, among other things, it is an unfair or deceptive trade practice to

make false, misleading, or deceptive representations concerning the profits or earnings that may

be anticipated by a participant in a money-making opportunity (i.e., a person who has been

accepted or hired for, has purchased, or otherwise is engaging in the money-making

opportunity).

       171.     The Notice cited a series of litigated decisions that determined, among other

things, that it is an unfair or deceptive trade practice to make false, misleading, or deceptive

representations concerning the profits or earnings that may be anticipated by a participant in a

money-making opportunity. The Notice warned Grubhub of its potential liability for civil


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penalties under Section 5(m)(1)(B) of the FTC Act, for knowingly engaging in acts or practices

determined by the Commission to be unfair or deceptive, and thus unlawful.

       172.    The letter instructed Grubhub to contact Commission staff if it had any questions

or to visit the Commission’s website at www.ftc.gov/MMO-notice to obtain copies of the case

decisions discussed in the Notice.

       173.    Despite receiving the Notice of Penalty Offenses, Grubhub continued to make

misleading earnings claims in marketing its money-making opportunity.

                                         *      *       *

       174.    Based on the facts and violations of law alleged in this Complaint, Plaintiff FTC

has reason to believe that Defendants are violating the following laws enforced by the

Commission:

                              VIOLATIONS OF THE FTC ACT

       175.    Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or deceptive acts

or practices in or affecting commerce” and “unfair methods of competition.”

       176.    Misrepresentations or deceptive omissions of material fact constitute deceptive

acts or practices prohibited by Section 5(a) of the FTC Act.

       177.    Acts or practices are unfair under Section 5 of the FTC Act if they cause or are

likely to cause substantial injury to consumers that consumers cannot reasonably avoid

themselves and that are not outweighed by countervailing benefits to consumers or competition.

15 U.S.C. § 45(n).

       178.    Conduct is an unfair method of competition under Section 5 of the FTC Act if it is

undertaken by an actor in the marketplace and goes beyond competition on the merits. Deceptive

conduct that negatively affects competitive conditions goes beyond competition on the merits.




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                                 Count I (by Plaintiff FTC)
                  Deceptive Claims Regarding Price for Grubhub’s Services

         179.   In numerous instances in connection with the advertising, marketing, promotion,

offering for sale, or sale of food ordering and delivery services, Defendants represent, directly or

indirectly, expressly or by implication, that:

                a. Grubhub customers will pay a specific amount for Grubhub’s delivery

                   services; or

                b. Grubhub+ subscribers will receive free delivery.

         180.   In numerous instances, Defendants’ representations as set forth above are false or

misleading.

         181.   Therefore, Defendants’ representations constitute a deceptive act or practice in

violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

                                   Count II (by Plaintiff FTC)
                                     Unfair Account Blocks

         182.   In numerous instances, Defendants deny consumers use of their accounts and

funds, including by doing so without notifying consumers or providing recourse to restore such

use.

         183.   Defendants’ acts or practices set forth above have caused or are likely to cause

substantial injury to consumers that consumers cannot reasonably avoid themselves and that are

not outweighed by countervailing benefits to consumers or competition.

         184.   Therefore, Defendants’ acts or practices constitute unfair acts or practices in

violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a), (n).




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                                 Count III (by Plaintiff FTC)
                        Unfair Listing of Restaurants Without Consent

       185.    In numerous instances, Defendants have created listings for restaurants without

the restaurants’ express informed consent and have deficiently processed diners’ orders from

those restaurants.

       186.    Defendants’ actions set forth above have caused or are likely to cause substantial

injury to these restaurants that the restaurants cannot reasonably avoid themselves and that is not

outweighed by countervailing benefits to the restaurants or competition.

       187.    Therefore, Defendants’ acts or practices constitute unfair acts or practices in

violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a), (n).

                                   Count IV (by Plaintiff FTC)
                                  Unfair Methods of Competition

       188.    Grubhub competes in the market for prepared meal delivery both with

independent restaurants that offer delivery services and with other third-party food delivery

platforms that process and/or deliver prepared meals to customers.

       189.    In numerous instances, Grubhub has created listings for restaurants without the

restaurants’ express informed consent and has deficiently processed diners’ orders from those

restaurants. Grubhub pursued this deceptive tactic explicitly in order to boost growth and achieve

greater scale. Grubhub’s creation of listings for unaffiliated restaurants and processing of diners’

orders from those restaurants is deceptive because Grubhub represents to diners that the

restaurants are affiliated with Grubhub when they are not. Grubhub has also gone out of its way

to conceal its tactics from restaurants, even as its practice of listing unaffiliated restaurants harms

the revenues and reputations of those restaurants. When asked to remove such listings, Grubhub

has ignored the request or sought to leverage the request to coerce the restaurant into signing up

for a partnership with Grubhub.


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       190.    Grubhub represents to diners, directly or indirectly, expressly or by implication,

including by creating listings for Unaffiliated Restaurants and processing diners’ orders from

those restaurants, that Grubhub maintains an affiliation with those Unaffiliated Restaurants. In

fact, however, in numerous instances in which Grubhub makes the representations set forth

above, Grubhub has no affiliation with those Unaffiliated Restaurants. These representations are

material to diners.

       191.    Grubhub also deceives meal delivery customers about its fees, to induce them to

sign up for and use its service. This conduct constitutes methods of competition in the market for

prepared meal delivery. These practices are not conditions of the marketplace, but tactics used by

Grubhub to gain scale rapidly and to gain advantage over other third-party meal delivery

platforms and independent restaurants that offer meal delivery.

       192.    These practices are deceptive and coercive and tend to negatively affect

competitive conditions in the meal delivery market, with respect to both independent restaurants

that offer delivery services and other third-party food delivery platforms that process and/or

deliver prepared meals to diners. This deceptive and coercive conduct tends to negatively affect

competitive conditions because it enables Grubhub to gain customers, divert sales from rivals,

grow its operations, and gain an unfair advantage over competing delivery services. Moreover,

this deceptive and coercive conduct and the advantages gained by those engaged in such conduct

punish honest competitors, making it infeasible for companies not engaged in similarly deceptive

and coercive conduct to effectively compete in the prepared meal delivery market. Thus, the

practices go beyond competition on the merits, are unfair, and degrade the quality of competition

in that market. Grubhub’s strategy of using deceptive and coercive tactics to boost its growth and

scale constitute an unfair method of competition.

       193.    Therefore, Grubhub’s conduct set forth above constitutes an unfair method of

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competition in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a), (n).

                                  Count V (by Plaintiff FTC)
                       False or Unsubstantiated Driver Earnings Claims

       194.     In numerous instances in connection with the advertising, marketing, or

promotion of Defendants’ food delivery driver program, Defendants have represented, directly or

indirectly, expressly or by implication, that drivers are likely to earn a set hourly rate, such as

$26 per hour.

       195.     The representations set forth above are false or misleading or were not

substantiated at the time the representations were made.

       196.     Therefore, the making of the representations constitutes a deceptive act or practice

in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

     VIOLATIONS OF THE RESTORE ONLINE SHOPPERS’ CONFIDENCE ACT

       197.     In 2010, Congress passed the Restore Online Shoppers’ Confidence Act, 15

U.S.C. §§ 8401-05, which became effective on December 29, 2010. Congress passed ROSCA

because “[c]onsumer confidence is essential to the growth of online commerce. To continue its

development as a marketplace, the Internet must provide consumers with clear, accurate

information and give sellers an opportunity to fairly compete with one another for consumers’

business.” 15 U.S.C. § 8401.

       198.     Section 4 of ROSCA, 15 U.S.C. § 8403, generally prohibits charging consumers

for goods or services sold in transactions effected on the Internet through a negative option

feature, as that term is defined in the FTC’s Telemarketing Sales Rule (“TSR”), 16 C.F.R.

§ 310(w), unless the seller: (a) clearly and conspicuously discloses all material terms of the

transaction before obtaining the consumer’s billing information; (b) obtains the consumer’s

express informed consent before making the charge; and (c) provides simple mechanisms to stop

recurring charges. See 15 U.S.C. § 8403.

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       199.    The TSR defines a negative option feature as: “in an offer or agreement to sell or

provide any goods or services, a provision under which the consumer’s silence or failure to take

an affirmative action to reject goods or services or to cancel the agreement is interpreted by the

seller as acceptance of the offer.” 16 C.F.R. § 310.2(w).

       200.    The auto-renewal provision of Defendants’ Grubhub+ subscription or

membership program is a negative option feature as defined by the TSR, 16 C.F.R. § 310.2(w).

       201.    Pursuant to Section 5 of ROSCA, 15 U.S.C. § 8404(a), and Section 18(d)(3) of

the FTC Act, 15 U.S.C. § 57a(d)(3), a violation of ROSCA shall be treated as a violation of a

rule promulgated under Section 18 of the FTC Act, 15 U.S.C. § 57a, and therefore a violation of

ROSCA constitutes an unfair or deceptive act or practice in or affecting commerce, in violation

of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

       202.    For each violation of ROSCA, Section 19 of the FTC Act, 15 U.S.C. § 57b,

authorizes the Court to grant relief as it finds necessary to redress injury to consumers, including

monetary relief, rescission or reformation of contracts, the refund of money or return of property,

and public notification respecting the rule violation or the unfair or deceptive act or practice.

                                  Count VI (by Plaintiff FTC)
                          Violation of ROSCA: Inadequate Disclosure

       203.    In numerous instances in connection with charging consumers for goods or

services sold in transactions effected on the Internet through a negative option feature, including

Grubhub+, Defendants have failed to clearly and conspicuously disclose, before obtaining the

consumer’s billing information, all material terms of the transaction, including all fees applicable

to Grubhub+ orders.

       204.    Defendants’ practices as set forth above are violations of Section 4 of ROSCA, 15

U.S.C. § 8403(1), and therefore constitute unfair or deceptive acts or practices in violation of

Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
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                              Count VII (by Plaintiff FTC)
          Violation of ROSCA: Failure to Provide Simple Cancellation Mechanism

       205.    In numerous instances in connection with charging consumers for goods or

services sold in transactions effected on the Internet through a negative option feature, including

Grubhub+, Defendants failed to provide a simple mechanism for a consumer to stop recurring

charges from being placed on the consumer’s credit card, debit card, bank account, or other

financial account.

       206.    Defendants’ practices as set forth above are violations of Section 4 of ROSCA, 15

U.S.C. § 8403(3), and therefore constitute unfair or deceptive acts or practices in violation of

Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

                     VIOLATIONS OF THE IMPERSONATION RULE

       207.    Under the Impersonation Rule, 16 C.F.R. pt. 461, it is a violation to “materially

and falsely pose as” a government entity or a business, as well as to “materially misrepresent” an

“affiliation with, including endorsement or sponsorship by” a government entity or a business.

       208.    Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), a violation of

the Impersonation Rule constitutes an unfair or deceptive act or practice under Section 5(a)(1) of

the FTC Act, 15 U.S.C. § 45(a)(1).

       209.    For each violation of the Impersonation Rule, Section 19 of the FTC Act, 15

U.S.C. § 57b, authorizes the Court to grant relief as it finds necessary to redress injury to

consumers, including monetary relief, rescission or reformation of contracts, the refund of

money or return of property, and public notification respecting the rule violation or the unfair or

deceptive act or practice.




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                                 Count VIII (by Plaintiff FTC)
                              Violations of the Impersonation Rule

       210.    In numerous instances in connection with the advertising, marketing, promotion,

offering for sale, or sale of food ordering and delivery services, including by creating listings for

Unaffiliated Restaurants and processing diners’ orders from those restaurants, Defendants

represent to diners, directly or indirectly, expressly or by implication, that Grubhub maintains an

affiliation with those Unaffiliated Restaurants.

       211.    In fact, in numerous instances in which Defendants make the representations set

forth above, Defendants have no affiliation with those Unaffiliated Restaurants.

       212.    Therefore, Defendants’ acts or practices are violations of the Impersonation Rule,

16 C.F.R. pt. 461, and therefore also constitute unfair or deceptive acts or practices in violation

of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

    VIOLATIONS OF PRIOR COMMISSION DETERMINATIONS CONCERNING
        UNFAIR OR DECEPTIVE ACTS OR PRACTICES IN COMMERCE

       213.    Pursuant to Section 5(m)(1)(B) of the FTC Act, 15 U.S.C. § 45(m)(1)(B), if the

Commission has determined in a proceeding under section 5(b) of the FTC Act, 15 U.S.C.

§ 45(b), that an act or practice is unfair or deceptive and issued a final cease and desist order with

respect to the act or practice, then a person, partnership, or corporation that engages in such act

or practice with actual knowledge that such act or practice is unfair or deceptive and is unlawful

under Section 5(a)(1) of the FTC Act shall be liable under the FTC Act for such relief as may be

appropriate.

       214.    In prior litigated decisions, the Commission has determined that false, misleading,

or deceptive representations concerning earnings in a money-making opportunity—like

Grubhub’s false earnings claims about delivery workers—are unfair or deceptive and violate




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Section 5(a)(1) of the FTC Act and issued final cease and desist orders with respect to those acts

or practices.

                                 Count IX (by Plaintiff FTC)
            Violations of Prior Commission Determinations Known to Defendants

        215.    At least since receiving the Notice of Penalty Offenses Concerning Money-

Making Opportunities and associated cover letter on October 26, 2021, Defendants have had

actual knowledge that, in connection with the advertising or promotion of money-making

opportunities, making false, misleading, or deceptive earnings claims is an unfair or deceptive

act or practice, unlawful under Section 5(a)(1) of the FTC Act.

        216.    In numerous instances since receiving the letter and Notice, Defendants

represented, directly or indirectly, expressly or by implication, that drivers in Defendants’ food

delivery program are likely to earn a set hourly rate, such as $26 per hour.

        217.    In fact, the representations set forth above are false or misleading or were not

substantiated at the time the representations were made.

        218.    Since at least October 26, 2021, Defendants have engaged in these acts and

practices with the actual knowledge that, in prior litigated decisions, the Commission has

determined that these acts or practices are unfair or deceptive and violate Section 5(a)(1) of the

FTC Act and issued final cease and desist orders, other than consent orders, with respect to those

acts or practices.

                                          *       *       *

        219.    Based on the facts and violations of law alleged in this Complaint, Plaintiff

People of the State of Illinois has reason to believe that Defendants are violating the following

laws enforced by the Illinois Attorney General:




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                        VIOLATIONS OF ILLINOIS STATE LAW

                              The Illinois Consumer Fraud Act

       220.   Section 2 of the Consumer Fraud and Deceptive Business Practices Act

(“Consumer Fraud Act”) provides the following:

              Unfair methods of competition and unfair or deceptive acts or practices,
              including but not limited to the use or employment of any deception fraud,
              false pretense, false promise, misrepresentation or the concealment,
              suppression or omission of any material fact, with intent that others rely
              upon the concealment, suppression or omission of such material fact, or
              the use or employment of any practice described in Section 2 of the
              ‘Uniform Deceptive Trade Practices Act’, approved August, 5, 1965 [815
              ILCS 510/2], in the conduct of any trade or commerce are hereby declared
              unlawful whether any person has in fact been misled, deceived or
              damaged thereby. In construing this section consideration shall be given to
              the interpretations of the Federal Trade Commission and the federal courts
              relating to Section 5(a) of the Federal Trade Commission Act.

       815 ILCS 505/2

       221.   Section 7 of the Consumer Fraud Act provides:

              (a)     Whenever the Attorney General has reason to believe that any
              person is using, has used, or is about to use any method, act or practice
              declared by the Act to be unlawful, and that proceedings would be in the
              public interest, he may bring an action in the name of the State against
              such person to restrain by preliminary or permanent injunction the use of
              such method, act or practice. The Court, in its discretion, may exercise all
              powers necessary, including by not limited to: injunction, revocation,
              forfeiture or suspension of any license, charger, franchise, certificate or
              other evidence of authority of any person to do business in this State;
              appointment of a receiver, dissolution of domestic corporations or
              association suspension or termination of the right of foreign corporation or
              associations to do business in this State; and restitution.

              (b)     In addition to the remedies provided herein, the Attorney General may
              request and this Court may impose a civil penalty in a sum not to exceed $50,000
              against any person found by the Court to have engaged in any method, act or
              practice declared unlawful under this Act. In the event the court finds the method,
              act or practice to have been entered into with the intent to defraud, the court has
              the authority to impose a civil penalty in a sum not to exceed $50,000 per
              violation.

              (c)    In addition to any other civil penalty provided in this Section, if a person
              is found by the court to have engaged in any method, act, or practice declared
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               unlawful under this Act, and the violation was committed against a person 65
               years of age or older, the court may impose an additional civil penalty not to
               exceed $10,000 for each violation.

       815 ILCS 505/7.

       222.    Section 10 of the Consumer Fraud Act provides, “In any action brought under the

provisions of this Act, the Attorney General is entitled to recover costs for the use of this State.”

815 ILCS 505/10.

                        Illinois Uniform Deceptive Trade Practices Act

       223.    Section 2 of the Illinois Uniform Deceptive Trade Practices Act provides, in

relevant part, the following:

               A person engages in a deceptive trade practice when, in the course of his
               or her business, vocation, or occupation, the person:

                                                  ***
               (2)    causes likelihood of confusion or of misunderstanding as the
               source sponsorship, approval, or certification of good or services;

               (3)      causes likelihood of confusion or of misunderstanding as to
               affiliation, connection, or association with or certification by another;

                                                    ***
               (5)    represents that goods or services have sponsorship, approval,
               characteristics, ingredients, uses, benefits, or quantities that they do not
               have or that a person has a sponsorship, approval, status, affiliation, or
               connection that he or she does not have;

                                                  ***
               (11) makes false or misleading statements of fact concerning the
               reasons for, existence of, or amounts of price reductions;

               (12) engages in any other conduct which similarly creates a likelihood
               of confusion or misunderstanding.

       815 ILCS 510/2(a)

               (b)    In order to prevail in an action under this Act, a plaintiff need not
               prove competition between the parties or actual confusion or
               misunderstanding.

       815 ILCS 510/2(b).
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                              Count X (by Plaintiff State of Illinois)
                          Violations of the Illinois Consumer Fraud Act

       224.      The Illinois Attorney General re-alleges and incorporates by reference each and

every allegation set forth in the foregoing paragraphs.

       225.      Defendants, in the course of trade or commerce, have in numerous instances

engaged in conduct which constitutes unfair and deceptive acts or practices declared unlawful

under section 2 of the Consumer Fraud Act, 815 ILCS 505/2, by:

                 A.     Misrepresenting directly or indirectly, expressly or by implication, through

       advertisements, marketing, and offers for the sale of food delivery services, that Illinois

       consumers would pay a set delivery fee in connection with a Grubhub food delivery

       order;

                 B.     Failing to disclose or adequately disclose to consumers that additional fees

       apply to delivery orders when knowledge of the additional fees would be material to

       consumers in deciding to place delivery orders through Grubhub, thereby suppressing or

       omitting a material fact with the intent that consumers rely upon that suppression or

       omission;

                 C.     Misrepresenting directly or indirectly, expressly or by implication, the true

       cost of Grubhub’s food delivery services to Illinois consumers by failing to disclose or

       adequately disclose to consumers the additional fees it applies on delivery orders;

                 D.     Misrepresenting directly or indirectly, expressly or by implication, through

       advertisements, marketing, and offers for the sale of food delivery services, that Illinois

       consumers who purchase Grubhub+ subscriptions will receive free deliveries for food

       orders;

                 E.     Failing to disclose or adequately disclose to Illinois consumers all

       applicable fees for Grubhub+ delivery orders when the fees would be material to
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  consumers in deciding to sign up for and place delivery orders using Grubhub+, thereby

  suppressing or omitting a material fact with the intent that consumers rely upon that

  suppression or omission;

         F.      Misrepresenting directly or indirectly, expressly or by implication, the

  benefits offered to Illinois consumers by failing to disclose or adequately disclose all

  applicable fees for Grubhub+ subscribers’ delivery orders;

         G.      Denying consumers access to consumers’ Grubhub gift card funds by,

  among other methods, canceling the consumers’ orders, blocking consumers from

  completing new orders, preventing consumers from transferring gift card balances to

  other accounts, and refusing to provide refunds for the withheld gift card funds, which

  conduct is unfair, oppressive, offends public policy, and causes substantial injury to

  consumers that cannot reasonably be avoided;

         H.      Misrepresenting directly or indirectly, expressly or by implication, that

  Grubhub delivery services share a sponsorship, approval, status, affiliation, or

  connection, with Unaffiliated Restaurants;

         I.      Advertising that drivers are likely to earn an inflated and atypical hourly

  compensation rate that is substantially more than the typical hourly compensation rate,

  thereby suppressing or omitting a material fact, with the intent that prospective Illinois

  Grubhub drivers rely upon that misrepresentation, suppression or omission;

         J.      Misrepresenting directly or indirectly, expressly or by implication, the

  amount a prospective Grubhub driver can expect to earn, by advertising that drivers are

  likely to earn an inflated and atypical hourly compensation rate that is substantially more

  than the typical hourly compensation rate; and

         K.      Obstructing and impeding, consumer attempts to cancel recurring charges,

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       imposed by Defendants on consumers’ credit or debit cards, or other accounts, which

       conduct is unfair, oppressive, offends public policy, and causes substantial injury to

       consumers that cannot reasonably be avoided.

                           Count XI (by Plaintiff State of Illinois)
              Violations of the Illinois Uniform Deceptive Trade Practices Act

       226.    Defendants, in the course of a business, vocation, or occupation, have in

numerous instances engaged in deceptive trade practices in violation of Section 2 of the Illinois

Uniform Deceptive Trade Practices Act, 815 ILCS 510/2, by:

               A.     Creating Grubhub listings for restaurants and processing consumers’

       orders in the guise of those restaurants, without the restaurants’ knowledge or consent,

       and causing a likelihood of confusion or misunderstanding among Illinois consumers as

       to the source, sponsorship, approval, or certification of the goods or services, in violation

       of 815 ILCS 510/2(a)(2).

               B.     Creating Grubhub listings for restaurants and processing consumers’

       orders in the guise of those restaurants, without the restaurants’ knowledge or consent,

       causing a likelihood of confusion or misunderstanding among Illinois consumers as to

       Grubhub’s affiliation, connection, or association with the unaffiliated restaurants, in

       violation of 815 ILCS 510/2(a)(3).

               C.     Creating Grubhub listings for restaurants and processing consumers’

       orders in the guise of those restaurants, without the restaurants’ knowledge or consent,

       representing that Grubhub’s delivery services have the sponsorship or approval of

       unaffiliated restaurants when, in truth and in fact, they do not, in violation of 815 ILCS

       510/2(a)(5).

               D.     Creating Grubhub listings for restaurants and processing consumers’

       orders in the guise of those restaurants, without the restaurants’ knowledge or consent,
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  representing that unaffiliated restaurants have an affiliation or connection with Grubhub

  when, in truth and in fact, they do not, in violation of 815 ILCS 510/2(a)(5).

         E.      Advertising that Grubhub+ subscribers will receive free delivery services

  when, in truth and in fact, Defendants bait consumers with claims of free delivery while

  assessing other fees to cover the cost of delivery, thus making false and misleading

  statements of fact concerning the existence and amount of price reductions, in violation

  of 815 ILCS 510/2(a)(11).

         F.      Advertising that Grubhub+ subscribers will receive free delivery services

  when, in truth and in fact, Defendants bait consumers with claims of free delivery while

  assessing other fees to cover the cost of delivery, thus causing a likelihood of confusion

  or misunderstanding among Illinois consumers who hold Grubhub+ subscriptions, in

  violation of 815 ILCS 510/2(a)(12).

         G.      Representing to consumers that they will pay a lesser amount for

  Grubhub’s delivery services than the actual amount charged, causing a likelihood of

  confusion or misunderstanding in regards to delivery costs among Illinois consumers who

  place orders through Grubhub, in violation of 815 ILCS 510/2(a)(12).

         H.      Failing to disclose or adequately disclose to consumers all additional fees

  charged for and applied to their delivery orders, causing a likelihood of confusion or

  misunderstanding among Illinois consumers who place orders through Grubhub, in

  violation of 815 ILCS 510/2(a)(12).

         I.      Advertising that drivers are likely to earn an inflated and atypical hourly

  compensation rate substantially in excess of the hourly rate earned by a typical Illinois

  driver during the advertised time period, causing a likelihood of confusion or

  misunderstanding among prospective Illinois Grubhub drivers, in violation of 815 ILCS

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        510/2(a)(12).

                                     CONSUMER INJURY

        227.   Consumers are suffering, have suffered, and will continue to suffer substantial

injury as a result of Defendants’ violations of the FTC Act, ROSCA, the Impersonation Rule, the

Illinois Consumer Fraud Act, and the Uniform Deceptive Trade Practices Act. Absent injunctive

relief by this Court, Defendants are likely to continue to injure consumers and harm the public

interest.

                                    PRAYER FOR RELIEF

        Wherefore, the FTC and the State of Illinois request that the Court:

        A.     Enter a permanent injunction to prevent future violations of the FTC Act,

ROSCA, the Impersonation Rule, the Illinois Consumer Fraud Act, and the Illinois Uniform

Deceptive Trade Practices Act;

        B.     Award monetary and other relief within the Court’s power to grant;

        C.     Award such relief as the Court finds necessary to redress injury to consumers

resulting from Defendants’ violations of the Illinois Consumer Fraud Act and the Illinois

Uniform Deceptive Trade Practices Act, including, but not limited to, rescission or reformation

of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies;

        D.     Require Defendants to pay a civil penalty in the amount of $50,000 for each

deceptive and unfair act or practice done in violation of the Consumer Fraud Act and an

additional penalty of $50,000 for each violation the Court finds that Defendants committed with

the intent to defraud, pursuant to 815 ILCS 505/7(b);

        E.     Require Defendants to pay an additional civil penalty of $10,000 for each

violation of the Illinois Consumer Fraud Act found to have been committed against a senior

citizen, pursuant to 815 ILCS 505/7(c);

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                                     Thomas.James@ilag.gov [email, James]
                                     Wilton.Person@ilag.gov [email, Person]
                                     William.Wingo@ilag.gov [email, Wingo]
                                     (312) 814-2218 [phone, Grzeskiewicz]
                                     (773) 590-7944 [phone, James]
                                     (224) 252-6458 [phone, Person]
                                     (773) 758-4569 [phone, Wingo]




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