Grubhub reached a $3.5 million settlement with D.C. Attorney General Karl Racine Friday over a city lawsuit alleging the food delivery app was not transparent with its application of fees, which the city considered deceptive marketing.
“Grubhub’s hidden fees and misleading marketing tactics were designed to get the company an extra buck at the expense of DC residents — but we’re not letting them get away with it. No company, big or small, can take advantage of DC residents without consequence,” Mr. Racine wrote in the announcement of the settlement.
Grubhub will pay $800,000 as a civil penalty to the District and will pay the other $2.7 million out to affected customers, first in the form of a refundable credit, then in the form of a check if the credit is not used within 90 days of its issuing.
The refunds will be broken down depending on how much a consumer uses the Grubhub app, on a scale going from $4.50 to $7 to $10, according to technology website The Verge.
In addition, the District required a number of reforms to bring Grubhub into compliance with the city’s Consumer Protection and Procedures Act (CPPA), including:
— Prominently disclosing to consumers when it presents search results that additional fees may apply at checkout.
— Listing the name and amount of each fee as a separate line item at checkout.
— Stopping the practice of combining taxes and fees into one line item.
— Removing ad copy that suggests Grubhub+ subscribers receive “free delivery” and specifying that the $0 delivery fee applies only to eligible orders and that other fees may apply.
— No longer charging menu prices higher than those available at the restaurant itself unless it clearly discloses, both on the menu and at checkout, that prices may be higher on Grubhub.
— Shutting down all duplicate microsites for restaurants located in the District or transfer ownership to the restaurant.
“Settling this lawsuit is in the best interest of our business, and the matter is now resolved. Grubhub is committed to supporting all restaurants and diners and is taking a number of steps to ensure price transparency,” a Grubhub spokesperson told The Washington Times.
In addition, Grubhub has begun implementing changes as a result of the settlement in order to “provide additional clarity for our diners and thousands of restaurant partners,” according to its website.
Changes include identifying restaurants unavailable on Grubhub, shutting down or transferring duplicate microsites for restaurants, and explaining discrepancies in pricing between the store and the app.
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