DC AG sues Grubhub for sneaky charges, screwing up local restaurants

of not so innovative department

Enforcing US regulations and penalizing companies that rip off consumers with sneaky fees is not what you would call…consistent. For example, the telecommunications and cable industries have long exploited a wide range of crap fees to increase advertised prices with only fleeting penalties. The same can be said for banks, airlines, hotels, and many other industries that are happy to use nickels and pennies.

At one point, it became the norm of regulatory policy in the United States to tacitly approve of scamming your customers, provided you were slightly smart about it. Penalties for false advertising at lower prices or for defrauding consumers can often be difficult to obtain.

Last week, District of Columbia Attorney General Karl Racine announced that he would sue Grubhub for misleading charges and various other questionable business practices:

“Grubhub misled District residents and took advantage of local restaurants to boost its own profits, even as District consumers and small businesses struggled during the COVID-19 pandemic,” AG Racine said. “Grubhub charged hidden fees and used bait and switch advertising tactics, which are illegal.

What also caused problems for Grubhub was a marketing promotion they ran that offered users “discounts” that the company said would go to help struggling restaurants during the COVID crisis. Instead, Grubhub simply passed on the lost revenue to local DC restaurants:

“But Grubhub did not fully cover the costs of these discounts. Instead, it passed on most of the costs of the discounts to already struggling restaurants. Grubhub also forced restaurants to pay its full commission – based on undiscounted prices – on discounted orders.This promotion drastically reduced restaurants’ already low profit margins and misled DC residents who thought their orders through Grubhub would help their favorite restaurants.

Chic! Innovative!

Of course, broadband providers have defrauded users during the pandemic in various ways, including completely arbitrary and unnecessary charges, and none of them have been penalized. So while this may be a welcome development and an appropriate punishment for Grubhub, the government crackdown on exploiting consumers through sneaky fees remains inconsistent.

Filed Under: apps, consumer rights, fees, food delivery, gig economy, karl root, restaurants, takeout

Companies: grubhub

Gladys T. Hensley