D.C. accused Grubhub of obscuring fees and misleading customers. / Photo courtesy of Grubhub
Grubhub will pay $3.5 million to settle a lawsuit filed by the District of Columbia alleging it deceived customers with hidden fees and other practices.
$2.7 million of the settlement amount will go to affected customers. The delivery company will also have to change how it communicates fees in its app.
The suit filed in March listed eight Grubhub policies that the District said misled customers and violated consumer protection law.
They included obscuring some charges like service fees and small-order fees and advertising free delivery with a Grubhub+ subscription, even though members still have to pay a service fee on every order.
“Grubhub used every trick in the book to manipulate customers into paying far more than they owed,” said D.C. Attorney General Karl Racine in a statement last week. “Grubhub’s hidden fees and misleading marketing tactics were designed to get the company an extra buck at the expense of D.C. residents—but we’re not letting them get away with it.”
As part of the settlement, Grubhub agreed to do the following to create more transparency around fees:
- Prominently disclose to customers that additional fees may apply at checkout. (The company is adding a “fees” link detailing its various extra charges.)
- List each fee separately at checkout as described under the D.C. Fair Meals Delivery Act.
- Stop advertising that Grubhub+ users get free delivery without noting that additional fees may apply.
- Note that menu prices may be higher on the app than at the restaurant itself.
- Shut down Grubhub-operated microsites for D.C. restaurants or transfer ownership to the restaurant.
In addition to those changes, Grubhub is also now identifying non-partnered restaurants, which are restaurants that don’t have contracts with the company but that it has nonetheless created a listing for in its marketplace.
“We agreed to this settlement to put this litigation behind us and continue moving our business forward,” a Grubhub spokesperson said in a statement. “We remain committed to providing transparency throughout the ordering process for our diners and restaurant partners.”
The $3.5 million settlement includes an $800,000 civil penalty to the District, $200,000 in restitution to former account holders and $2.5 million to current account holders.
The $2.5 million will be distributed this month in the form of a Grubhub credit of $4.50, $7 or $10 depending on a customer’s order history and frequency. If a customer doesn’t use the credit within 90 days, they’ll get a check for the amount.
The settlement comes less than a month after Uber Eats said it would pay $10 million to end an investigation by the city of Chicago that found it listed restaurants without their consent and violated the city’s delivery fee cap.
They are part of an ongoing battle between delivery companies and local governments seeking to regulate them.
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