D.C. sues Grubhub, saying fees, promotions are deceptive

The District of Columbia is suing meal delivery company Grubhub, saying it misled customers with a promotion that claimed to help restaurants during the height of the pandemic.

The lawsuit, which was filed Monday, also alleges that Grubhub deceives customers by obscuring added fees and failing to disclose that its prices for menu items may be higher than restaurants’ prices.

“We are seeking to force Grubhub to end its unlawful practices and be transparent so D.C. residents can make informed decisions about where to order food and how to support local businesses,” D.C. Attorney General Karl Racine said in a statement.

Grubhub said it complies with Washington’s laws. The Chicago-based company said some of the practices cited by the lawsuit — such as delivering from non-partner restaurants or setting up websites that mimic a restaurant’s — have been discontinued.

Grubhub said it has spent the last year talking to the D.C. attorney general’s office and is “disappointed” that he moved forward with the lawsuit.

“We will aggressively defend our business in court and look forward to continuing to serve D.C. restaurants and diners,” the company said in a statement.

But Grubhub also said it would make some changes going forward, including more clearly listing service fees and other added charges during the checkout process.

It’s not the first time Racine has targeted a delivery company. Last June, Racine and Pennsylvania’s attorney general announced a settlement with Uber Eats requiring it to make clear that it may charge more for items than restaurants do. Racine also sued DoorDash in 2019 alleging that the company was using tips to subsidize drivers’ pay. DoorDash eventually settled that case for $2.5 million.

The newest lawsuit echoes charges that have been filed by other cities and states. Chicago sued Grubhub and DoorDash last August, alleging that both companies were charging higher menu prices than restaurants and charging more in fees than initially disclosed.

Massachusetts also sued Grubhub last summer, alleging that the company exceeded the state’s 15% fee cap that was put in place during the pandemic.

The D.C. lawsuit says Grubhub launched a promotion throughout the U.S. in March 2020 called “Supper for Support,” which offered consumers $10 off orders of $30 or more. Grubhub presented the program as a way for consumers to help local restaurants survive the pandemic, the lawsuit says.

But Grubhub didn’t make clear that participating restaurants had to fund the $10 discount themselves and had to pay Grubhub commissions based on the non-discounted order totals. In Washington alone, customers redeemed more than 10,000 discounts, the lawsuit said.

Grubhub said the company’s promotional materials never stated or implied that restaurants weren’t paying for the discounts. But the company said in the future it will disclose when a diner promotion is funded by restaurants.

Grubhub also said its user terms make clear that the menu prices on its site may be higher than those on a restaurant’s menu. But the company said it will start disclosing that more clearly during check-out before a customer places an order.