Lawsuit prompts Grubhub to add disclosures about hidden fees

Washington D.C. Attorney General Karl Racine announced today that his office filed a lawsuit against Grubhub for “misleading District residents and taking advantage of local restaurants to boost its own profits.”

The lawsuit alleges that Grubhub violated D.C.’s Consumer Protection Procedures Act (CPPA) in eight different ways, which mostly center on false advertising. The filing references misleading prices (prices are often higher in-app than at the restaurant) and false claims that deliveries via Grubhub+ were free when they still contained a service charge.

Some of the complaints point to practices that the platform has since discontinued, like Grubhub’s early-pandemic-era “Supper for Support” promotion. Launched in late March 2020, Grubhub offered restaurants the opportunity to offer a $10 coupon on orders over $30, but the restaurant had to foot the bill for that free food. On the consumer end, Grubhub encouraged customers to “save while supporting the restaurants [they] love,” even though their promotion actually put more strain on restaurants by pressuring them to lower profit margins (if one neighborhood taco shop enrolled in the promotion, and the other didn’t, where do you think consumers would direct their business?).

“The company deceived users with a promotion that claimed to support local restaurants during the heart of the pandemic. But in reality, this program cut into struggling restaurants’ profit margins while padding Grubhub’s bottom line,” Attorney General Racine said in a statement.

Grubhub is also being sued for listing restaurants on its website and app that weren’t registered with Grubhub, making websites for affiliated restaurants without their permission and listing phone numbers on restaurant pages that directed to Grubhub representatives, rather than the actual restaurant. Grubhub has also since stopped those practices, perhaps in part due to a past lawsuit over Grubhub listing restaurants without their permission.

In an emailed statement, a company spokesperson said: “We are disappointed [the Attorney General’s office] have moved forward with this lawsuit because our practices have always complied with D.C. law, and in any event, many of the practices at issue have been discontinued. We will aggressively defend our business in court and look forward to continuing to serve D.C. restaurants and diners.” The spokesperson added that Grubhub has worked with Racine’s office over the last year to address their concerns.

As a result of the lawsuit, a Grubhub spokesperson told TechCrunch that the app will make some messaging changes on its app, which extend to all users, not just D.C. customers. Now, Grubhub will include a disclosure during checkout that prices may be lower in store. Instead of advertising Grubhub+ to offer unlimited free delivery, the company will be more transparent about the actual offer, which provides $0 delivery on orders over $12, though service fees may apply. Grubhub will also make it more clear that customers can place free orders online, but that this only applies if you’re picking up the food.

Despite an uptick in delivery orders during the pandemic, food delivery apps have still struggled to turn a profit — even as their business model leaves many gig workers and local restaurant owners with the short end of the stick.

Those inequities are increasingly attracting the attention of state and federal regulators. Attorney General Racine’s office has a history of suing delivery apps for deceptive practices. In 2019, Racine sued DoorDash for using customer tips to pay delivery drivers’ base wages, depriving drivers of their full tips. A year later, DoorDash was fined $2.5 million, which included $1.5 million to be paid to D.C. workers.