WASHINGTON, D.C. – Attorney General Karl A. Racine today announced that Grubhub Holdings, Inc. and Grubhub, Inc. (Grubhub) will pay $3.5 million for charging customers hidden fees and using deceptive marketing techniques to increase profits in violation of District consumer protection laws.
“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 District residents were already struggling to make ends meet,” said AG Racine. “Grubhub’s hidden fees and misleading marketing tactics were designed to get the company an extra buck at the expense of DC residents – but we’re not letting them get away with it. No company, big or small, can take advantage of DC residents without consequence.”
Grubhub is a food delivery company that operates in more than 4,000 cities across the country. Consumers place orders through the company’s website or app, which then connects the order with a “gig economy” worker who picks it up and delivers it to the consumer. The company makes money by charging consumers fees when they order delivery, and by charging fees and commissions to many of the restaurants that appear on its platform. In 2020 alone—as the COVID-19 pandemic limited indoor dining in many places, including in the District—Grubhub generated approximately $1.8 billion in revenue.
In March, 2022 the Office of the Attorney General (OAG) sued Gruhub for alleged violations of the District’s Consumer Protection and Procedures Act (CPPA), which prohibits a wide variety of deceptive and unlawful business practices. Under the CPPA, it is illegal to make misrepresentations about products or services, or to provide products or services that violate other District laws.
As a result of OAG’s action, Grubhub must pay $3.5 million, distributed as follows:
- $2.7 million will be paid back to affected customers. Those with active Grubhub accounts will receive a refundable credit and if the credit is not used within 90 days the money will be sent to customers in the form of a check.
- $800,000 civil penalty paid to the District.
Additionally, Grubhub must significantly change its business practices to ensure compliance with District law in ways that will set the industry standard for disclosing pricing information to consumers. To ensure no future violations of the CPPA, Grubhub must:
- Prominently disclose to consumers when it presents search results that additional fees may apply at checkout;
- List the name and amount of each fee as a separate line item at checkout;
- Stop its practice of combining taxes and fees into one line item;
- Stop advertising that Grubhub+ subscribers receive “free delivery” and instead specify that the $0 delivery fee only applies to eligible orders and that other fees may apply;
- Stop charging menu prices higher than those available at the restaurant itself unless it clearly discloses, both on the menu and at checkout, that prices may be higher on Grubhub; and
- Shut down all microsites for restaurants located in the District or transfer ownership to the restaurant.
Read the full agreement here.
This matter was handled by attorneys in the Public Advocacy Division: Adam Teitelbaum, Director, Office of Consumer Protection, Laura Beckerman, Senior Trial Counsel, Gary Tan, Spencer Scoville, and Christine Gephardt, Assistant Attorneys General.
Ensuring Gig Economy Companies Follow the Law
AG Racine has also worked to hold gig economy companies accountable for following the same laws as brick-and-mortar businesses—including consumer protection laws and wage and hour laws—and to stop companies from charging illegal hidden fees. OAG sued food delivery service, DoorDash, for its practice of misleading and encouraging consumers to tip for food deliveries, and then pocketing those tips instead of passing them along to workers. OAG recovered $1.5 million in restitution that was returned to DoorDash drivers to replace tips the company kept for itself. OAG also sued Instacart for including “service fees” on its platform that looked much like a tip for workers, but instead went to profit Instacart. OAG recovered $950,000 in restitution to car owners that experienced theft or damage to their vehicles while listed on the platform from Getaround, a car-sharing company, for failing to pay its taxes and misrepresenting its safety and security features.
How to Report Illegal or Unfair Business
To report unfair business practices, scams, or fraud, you can submit a consumer complaint to OAG by:
- Texting 202-738-5212
- Messaging OAG using the chat feature at: oag.dc.gov/consumer
- Submitting a complaint online at: https://oag.dc.gov/consumer-protection/submit-consumer-complaint
- Calling (202) 442-9828
- Emailing firstname.lastname@example.org