To resolve a complaint from the District of Columbia alleging that Grubhub misled customers by adding extra costs to their orders, the company was ordered to pay $3.5 million in settlement.
According to DC Attorney General Karl Racine, Grubhub misled customers by claiming that they could receive "free" online orders when in fact there were additional service charges.
The Company Was Allegedly Violating District Laws
In order to resolve a lawsuit filed in March by Racine, the food delivery service Grubhub has agreed to pay a $800,000 civil penalty as well as $2.7 million to consumers.
According to The Washington Post, in contravention of District law, the corporation employed misleading marketing tactics and charged clients concealed costs.
The complaint says that Grubhub used a bait-and-switch tactic by telling customers they would only pay a "delivery fee," but then adding a "service fee" and a "smaller order fee" to several transactions at the checkout page.
It also lists a number of other dubious business practices, such as how Grubhub combined service fees and sales taxes on the checkout page in a single line.
Additionally, the company was previously accused of adding restaurants without getting their consent in order to grow the service.
Grubhub reportedly built a number of microsites as well that looked like the actual websites of restaurants in order to route orders through the company instead.
According to the lawsuit, Grubhub hid costs and featured more than 1,000 restaurants on its platforms without entering into agreements with those establishments.
Moreover, the business frequently charged customers more for products than the restaurants did without disclosing this information.
However, when the lawsuit was initially filed, Grubhub denied the allegations and stated that many of the practices in question have been terminated, The Verge writes.
Read More: Google Settles For $392 Million Over Location Tracking Investigation
What Does The Settlement Entail
Grubhub is obligated to "put a refundable credit" in the accounts of impacted customers as part of the settlement.
Anyone who paid a minor order or service fee on a Grubhub Platform at a restaurant in Washington between January 1 of 2016 and December 31 of last year is affected by this.
The platform must also implement a number of adjustments, including prominently advertising any additional fees to clients at checkout.
This also included listing each fee on distinct lines, and shutting down or transferring ownership of the microsites, among others.
Additionally, Grubhub must stop claiming that "free delivery" is available to subscribers, and reveal when the costs for particular menu items are higher than what is being promoted at the restaurants themselves.
According to The Verge, Grubhub has agreed to offer further clarification for our consumers and thousands of restaurant partners, as per an amended post on its website.
Liza Dee, a spokesperson for Grubhub, stated on Friday that the company's best interests were served by the lawsuit being settled.
"Grubhub is committed to supporting all restaurants and diners, and is taking a number of steps to ensure price transparency," Dee disclosed in an email.
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