Attorney General Karl Racine of Washington, D.C., stated today that his agency has filed a lawsuit against Grubhub for “misleading District citizens and exploiting local eateries to increase its own profits.” Grubhub is accused of violating D.C.’s Consumer Protection Procedures Act (CPPA) in eight distinct ways, the majority of which revolve on fraudulent advertising, according to the lawsuit. The complaint mentions deceptive pricing (in-app prices are frequently higher than in-restaurant rates) and fraudulent promises that Grubhub+ deliveries are free when they still include a service fee.
Some of the complaints refer to tactics that the platform has subsequently phased out, such as Grubhub’s “Supper for Support” campaign during the early stages of the epidemic. Grubhub, which launched in late March 2020, allowed restaurants to provide a $10 voucher on purchases above $30, but the restaurant had to cover the cost of the free meal.
On the consumer side, Grubhub encouraged customers to “save while supporting the restaurants [they] love,” despite the fact that their promotion put more pressure on restaurants by forcing them to lower profit margins (imagine if one neighborhood taco shop participated in the promotion and the other didn’t).
“During the height of the epidemic, the firm tricked customers with a campaign that purported to assist local restaurants. In truth, this scheme slashed struggling eateries’ profit margins while boosting Grubhub’s profits,” Attorney General Racine stated in a statement. Grubhub is also being sued for displaying restaurants that aren’t registered with Grubhub on its website and app, creating websites for connected restaurants without their consent, and listing phone numbers on restaurant pages that go to Grubhub staff rather than the real restaurant. Grubhub has likewise ceased doing so, maybe as a result of a previous lawsuit over Grubhub listing eateries without their consent.
“We are unhappy [the Attorney General’s office] has pushed forward with this case since our methods have always conformed to D.C. law, and in any event, many of the activities at question have been ceased,” a business spokeswoman said in an emailed statement. We will vigorously defend our company in court and look forward to continuing to service restaurants and customers in Washington, D.C.” Over the previous year, Grubhub has worked with Racine’s office to resolve their concerns, according to the spokeswoman. A Grubhub spokeswoman told TechCrunch that the app will make certain messaging modifications as a result of the lawsuit, which will affect all users, not just D.C. clients.
Grubhub will now give a warning at checkout that pricing in stores may be lower. Rather of presenting Grubhub+ as offering endless free delivery, the firm will be more upfront about the real deal, which is $0 delivery on purchases above $12 with service costs. Grubhub will also make it clearer that consumers can place free online orders, but that this applies only if the meal is picked up.
Despite an increase in delivery orders during the epidemic, food delivery apps have failed to make a profit, despite the fact that their business model puts many gig workers and local restaurant owners on the losing end. State and federal officials are becoming increasingly concerned about these inequalities. The office of Wisconsin Attorney General Brad Racine has a history of suing delivery apps for fraudulent activities. Racine sued DoorDash in 2019 for denying delivery workers of their full gratuities by utilizing consumer tips to pay basic salaries. DoorDash was penalized $2.5 million a year later, with $1.5 million going to D.C. employees.
