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Grubhub sued by DC attorney general, alleging hidden fees and 'bait-and-switch' tactics

Claims against the food delivery service include failing to disclose when it charges higher prices than restaurants and impersonating local eateries, Racine alleged.

WASHINGTON — (Editor's Note: the video above is from May 5, 2020)

D.C. Attorney General Karl Racine is suing Grubhub for allegedly fooling District residents, he said in a Monday tweet, linking to the official complaint.

"Grubhub charges hidden fees and uses bait-and-switch tactics, all while pretending to help local businesses during the pandemic," Racine said. "This needs to stop." 

The attorney general went on to tweet an overview of the allegations against Grubhub covered in his lawsuit, which include:

  1. Failing to disclose when they charge higher prices than restaurants
  2. Impersonating local restaurants to get more business 
  3. Advertising “free” services that aren’t actually free

"I feel like most of the delivery services are predatory in the restaurant community," said Peter Opare chef and owner of Open Crumb in downtown Anacostia, "They take too much to the value of the add to the business. GrubHub has to figure out a way not to take 30% and find a business model that actually works for everyone."

D.C. resident Kenneth Stallings expressed frustration with what he felt were misleading advertisements. 

"A lot of times we’re thinking we’re supporting the restaurant where we’re buying food and making purchases now to realize the third party is making the money," Stallings said. 

AG Racine also expressed ire with a specific discount the delivery service advertised during the pandemic. 

"In one of Grubhub’s most shameless moves, at the beginning of the pandemic, it ran a discount called 'Supper for Support,' ginning up business by claiming to help struggling restaurants, and then stuck restaurants with the bill," Racine tweeted.

WUSA9 reached out to Grubhub for comment, and received the following statement from a spokesperson: 

“We work hard to support DC restaurants and diners, and we continually review and enhance our operations to better serve them and meet their expectations. During the past year, we've sought to engage in a constructive dialogue with the DC Attorney General’s office to help them understand our business and to see if there were any areas for improvement. We are disappointed they have moved forward with this lawsuit because our practices have always complied with DC law, and in any event, many of the practices at issue have been discontinued."

In its email to WUSA9, Grubhub went on to explain how it responded to each of the eight claims made by the attorney general. According to Grubhub, they have discontinued three of the policies Racine takes issue with, including the "Supper for Support" promotion, listing restaurants on its website that it didn't have a partnership with and creating "microsites for affiliated restaurants." 

The spokesperson alleged that Grubhub had "appropriately disclosed" five other claims made in the lawsuit. 

"We will aggressively defend our business in court and look forward to continuing to serve DC restaurants and diners," a Grubhub spokesperson said to WUSA9.

The food delivery company was founded in 2004 and has since surged in popularity, featuring more than 300,000 restaurant partners in over 4,000 U.S. cities, according to its website. In D.C. alone, Grubhub partners with just under 1,500 eateries. 

The strain on restaurants during the ongoing COVID-19 pandemic brought to light concerns regarding the transparency of delivery apps.

In June 2021, Racine and Pennsylvania's attorney general collaborated to make delivery service UberEats more transparent in providing new in-app disclosures about prices.

“Food delivery apps provide convenience, safety, and ease for so many consumers – especially during the pandemic,” said Racine in a release at the time. “As more and more consumers use apps like UberEats, it’s critical that these companies are transparent about their pricing and the fact that getting food directly from a restaurant is often cheaper."

RELATED: DC Attorney General calls for more transparency in food delivery app pricing

In 2020, Racine announced a settlement with another food delivery service, DoorDash, requiring it to pay $2.5 million to resolve allegations that it misled D.C. consumers and used tips left for workers to boost the company’s bottom line.

Also in 2020, D.C. lawmakers decided to cap the commission fees of third-party delivery companies to 15% on the purchase price of delivery and pickup orders. However, the cap was temporary, only to be in effect while the city was under an emergency order.

Grubhub submitted testimony for D.C. Council to consider prior to its vote, which was shared with WUSA9 beforehand. The testimony argued the company’s services keep small and independent restaurants from having to increase their costs.

UberEats also expressed displeasure at the council's consideration. 

"Regulating the commissions that fund our marketplace — particularly during these unprecedented times — would force us to alter the way we do business, set a far-reaching precedent in a highly competitive market, and could ultimately hurt those that we’re trying to help the most: customers, small businesses and delivery people,” the company said in a statement at the time.

RELATED: DC Council to consider capping commission fees of food delivery companies

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