Grubhub has been ordered to pay $3.5 million to settle a lawsuit from the District of Columbia alleging that the company misled customers by adding hidden charges to their orders. According to a press releaseGrubhub must pay DC $800,000 as a civil penalty, while the remaining $2.7 million “will be refunded to affected customers.”
In March, DC Attorney General Karl Racine filed a lawsuit against Grubhub, accusing him of falsely promising “free” online orders to customers, as well as “unlimited free delivery” for those who subscribe to Grubhub Plus . The lawsuit alleges that this practice is “misleading” as Grubhub continues to charge service fees for non-pickup orders from Grubhub Plus customers, as well as charge delivery and service fees for standard orders.
It also cites several other questionable business practices, such as how Grubhub bundled service fees on one line with sales tax on the checkout page, something the company only recently stopped doing. Grubhub was previously accused of putting restaurants on the platform without their permission to expand the service, launching a series of microsites similar to restaurants’ real sites to route orders through Grubhub. At the time of filing the lawsuit, Grubhub refuted the claims and said that “many of the practices in question have been discontinued.”
“Settling this lawsuit is in the best interest of our company and the matter has now been resolved,” Grubhub spokesperson Liza Dee said in a statement to The edge. “Grubhub is committed to supporting all restaurants and diners and is taking a number of steps to ensure pricing transparency.”
As part of the settlement, Grubhub is required to post “a refundable credit” to affected customers’ accounts, which applies to anyone who has “paid a small order or service fee for an order placed through the Grubhub platform” in a restaurant in DC anytime between January 1, 2016 and December 31, 2022. Affected customers will be split into three groups based on how often they have used the platform, with the first group getting a minimum of $4.50, the next a minimum of $7, and the people in the last group get at least $10. If the account owner doesn’t redeem the credit within 90 days of receiving it, Grubhub must send them a check for the amount due.
“Grubhub’s hidden fees and deceptive marketing tactics are designed to make the company a little extra money”
In addition to the payment, the platform must make some changes, such as prominently displaying additional charges to customers at checkout, listing each fee on separate lines, and closing or transferring ownership of the microsites it created for restaurants in DC. Grubhub must also stop telling Grubhub Plus members that they can receive “free delivery” and must now disclose when prices for certain menu items exceed what they are advertised in restaurants themselves. In an updated post on its websiteGrubhub says it has agreed to “provide additional clarity for our guests and thousands of restaurant partners.”
“Grubhub used every trick in the book to manipulate customers into paying far more than they owed, and even worse, they did so at the height of a global pandemic when the district’s residents were already struggling to make ends meet” Racine said in a statement. “Grubhub’s hidden fees and deceptive marketing tactics were designed to give the company an extra penny at the expense of DC residents, but we won’t let them get away with it.”
Update, 2:06 PM ET: Updated to add a statement from a Grubhub spokesperson.