Grubhub allegedly overcharged restaurants for its delivery services as the flailing eatery industry struggled to survive a business landscape made barren by COVID-19, according to a lawsuit by Massachusetts Attorney General Maura Healey.
The state attorney general's office accused Grubhub of violating a temporary Massachusetts law that capped the amount in fees that third-party delivery services could charge restaurants at 15% of the price of an online order. State lawmakers passed the 15% cap to ease restaurants' struggle during the coronavirus pandemic.
While Uber Eats and Door Dash adjusted their local charges to comply with the statute, Grubhub continued to overcharge restaurants, according to the lawsuit filed Thursday.
"Grubhub charged marketing and delivery fees equaling 15% of the order's price plus an additional 3% fee for collecting payments, fraud monitoring, [and] customer care," the lawsuit states. "As a result, Grubhub charged covered establishments 18% or more of the order's purchase price, in violation of the delivery fee cap statute."
Charging those extra fees damaged restaurants financially, raising costs in some cases "by thousands of dollars," the lawsuit states.
"At the heart of everything we do"
"Serving restaurants is at the heart of everything we do," Grubhub responded in a statement, adding that it strongly disagreed with the allegations made by Massachusetts prosecutors.
"While we do not believe the temporary price control was either legal or appropriate, we complied with it while it was in effect and for an additional month after it expired, effectively conveying millions of dollars to local restaurants across Massachusetts," the company said.
The 15% law started in January and ended in mid-June. Healey said in a statement Thursday that Grubhub repeatedly violated the law since its passage. Healey said she had sent two letters to Grubhub — one in February and another in May — asking the company to stop violating the law, but to no avail.
Grubhub is one of three companies that dominate the U.S. food delivery scene, along with Uber Eats and DoorDash.
Uber Eatsbut Uber officials never finalized a deal. Instead, Dutch company Just Eat Takeaway bought Grubhub for $7.3 billion. Uber Eats went on to acquire Postmates for $2.6 billion.
Healey and state prosecutors are asking a Boston judge to force Grubhub to pay $5,000 in fines for each instance the company violated the 15% law. The lawsuit did not reveal how many violations allegedly occurred. The money, if granted, would be returned to restaurants, prosecutors said.
"We are suing to get money back to these establishments and to hold Grubhub accountable for its unlawful conduct," Healey said in her statement "Our restaurants have been hard hit by this pandemic and we will do everything we can to help get them the relief they need to recover."