Grubhub Hit With $3.5M Fine Over Hidden Fees, Misleading Marketing

UPDATE 12/30: DC Attorney General Karl Racine says(Opens in a new window) his office has reached a $3.5 million settlement(Opens in a new window) with Grubhub over hidden fees and deceptive marketing tactics. Of that total, $2.7 million “will be returned to the consumers who were impacted, and [Grubhub] will have to shape up and disclose every fee separately,” Racine says.

That means Grubhub can’t combine taxes and fees into one line item, and if there are fees, it has to be clear about what they entail. It also can’t use the phrase “free delivery” if it’s charging other fees; instead, it has to say that Grubhub+ members are entitled to “$0 delivery fees.”

Grubhub is also banned from creating microsites for restaurants in Washington, D.C. As The Counter reported(Opens in a new window) in 2019, Grubhub was buying up web domains for restaurants on its platform, reportedly to block them from establishing their own web presences and locking them into relying on Grubhub, and paying its fees. At the time, Grubhub said it has stopped doing that and insisted(Opens in a new window) it “will continue to transfer ownership of these web properties at no cost to any restaurant partner who makes a request.”

Original Story 3/22/22:
DC Attorney General Karl Racine is suing Grubhub for “deceptive marketing tactics” during the COVID-19 lockdowns.

The food delivery company, which came under fire in Chicago last year, allegedly charged hidden fees and misled customers in an effort to increase profits at the height of the pandemic.

“Grubhub charged hidden fees and used bait-and-switch advertising tactics—which are illegal,” Racine said in a statement(Opens in a new window). “On top of that, 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.”

The online platform has since discontinued or disclosed each claim in the filing(Opens in a new window), according to a Grubhub spokesperson. “We work hard to support DC restaurants and diners, and we continually review and enhance our operations to better serve them and meet their expectations,” a company spokesperson told PCMag. “During the past year, we’ve sought to engage in a constructive dialogue with the DC Attorney General’s office to help them understand our business and to see if there were any areas for improvement.

“We are disappointed they have moved forward with this lawsuit because our practices have always complied with DC law, and in any event, many of the practices at issue have been discontinued,” the statement continued. “We will aggressively defend our business in court and look forward to continuing to serve DC restaurants and diners.”

Boasting a presence in more than 4,000 US cities, Grubhub earns income by charging customers and listed restaurants. In 2020 alone, as COVID limited indoor dining in many areas, Grubhub generated approximately $1.8 billion in revenue, according to the AG’s office.

“Consumers don’t mind paying for delivery fees, but Grubhub needs to be honest about those fees in the first place,” Racine said. “With this lawsuit, we are seeking to force Grubhub to end its unlawful practices and be transparent so DC residents can make informed decisions about where to order food and how to support local businesses.”

The City of Chicago in August took law enforcement actions against meal delivery companies Grubhub and DoorDash, complaining of similar infractions like false promotions, hidden fees, imposter websites, and “routing” phone numbers. Both firms contested the claims, calling Mayor Lori Lightfoot’s suit “baseless” and “categorically wrong.”

[Strictly Robots] A restaurant chain in Boston is changing the food automation game