Los Angeles County has filed a lawsuit against Grubhub alleging false and deceptive advertising, the latest in a string of lawsuits that say the food delivery app’s lack of transparency is hurting customers and its drivers.
The action, filed Wednesday, Feb. 21 in Los Angeles Superior Court, accuses GrubHub of luring customers with bait-and-switch tactics that promise free or flat pricing while instead charging fees at checkout.
Other complaints allege GrubHub’s tactics sometimes mean its services exceed the cost of the food being ordered.
An example the county cited included a turkey-on-rye sandwich ordered from Langer’s deli in Los Angeles. The subtotal for the sandwich was $17.95, but when fees are added, such as a $2.99 delivery charge, “other fees” of $3.33, tax of $2.31 and a $1 driver tip, the order total is nearly $10 higher at $27.58.
Grubhub disputes the lawsuit’s allegations, although the company said it would provide additional clarity on some issues cited in the lawsuit.
LA County’s complaint also contends the company’s “driver benefits fee” — implemented in December 2020 to fund certain wage and benefit guarantees to drivers as required under Proposition 22 — has been misrepresented to customers.
According to the complaint, Grubhub tells consumers the fee goes toward healthcare benefits for all of its drivers, when it actually provides only a partial subsidy for health coverage that most drivers don’t qualify for. The company has also suggested the fee eliminates the need to tip drivers.
In a statement issued Thursday, Grubhub said it no longer uses “for free” when describing its online delivery process in new marketing materials.
“Grubhub repeatedly discloses all fees prior to purchase,” the company said. “In addition, the terms of use make clear that fees may apply to orders placed on Grubhub.”
The company also disputes the claim that it offers a flat, upfront price for deliveries while tacking on various fees at checkout. All charges are disclosed prior to placing an order, the company said. But going forward, Grubhub plans to add a link to additional fee disclosures on its menus for Los Angeles restaurants.
GrubHub also defended the restaurant search results on its apps and websites, saying it takes into account a variety of factors, including location, restaurant category and a consumer’s past ordering behavior, in determining how options appear in search.
The company, which claims to have more than 365,000 restaurant partners in 4,000 U.S. cities, has been hit with several lawsuits in recent years all alleging similar deceptive practices.
In December 2022 the company was ordered to pay a $3.5 million settlement after the District of Columbia filed a lawsuit over the food delivery service’s alleged deceptive practices.
GrubHub was hit that same year with an investors’ lawsuit, claiming the third-party delivery provider misled investors about its performance. The company agreed to pay $42 million to settle a proposed class-action lawsuit.
In regard to the driver benefits fee, Grubhub said details on that are clearly disclosed on a separate publicly available resource page.
“Although we do not believe the language is in any way misleading, going forward, Grubhub will update the language diners see on the checkout page to further clarify the benefits drivers receive from Proposition 22,” the company said.
LA County Counsel Dawyn R. Harrison said the county’s lawsuit seeks to hold Grubhub accountable “for their unfair and deceptive business practices that deceive and overcharge consumers, exploit drivers and unfairly short-change restaurants on order refunds.”
LA County says the company’s misconduct has been mounting for years and was accelerated by the COVID-19 pandemic, when demand for food deliveries skyrocketed.
The lawsuit says that from 2019 to 2023 Grubhub processed millions of orders for meal deliveries in LA County alone with revenue hitting $1.8 billion in in 2020, a 39% increase over 2019. Grubhub was then acquired by Just Eat Takeaway, a Dutch multinational firm in 2021.
By contrast, nearly a third of California’s restaurants had permanently closed as a result of the pandemic, and two-thirds of the Grubhub’s drivers had at least temporarily lost their jobs, the complaint said.
“Grubhub has built this vast marketplace through practices that mislead consumers and restaurants and put the squeeze on the company’s delivery drivers,” the suit alleges.
The lawsuit seeks civil penalties of up to $2,500 for each violation of the Unfair Competition Law against a senior citizen or disabled person.
Source: Orange County Register
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