L.A. County accuses Grubhub of ‘bait-and-switch’ with last-minute fees
The price of the turkey on rye half-sandwich from Langer’s Delicatessen-Restaurant in Los Angeles, purchased through the delivery app Grubhub, starts around $17.
But at checkout, the costs mount. With additional fees and sales tax, the cost of a sandwich delivery can hit over $26.00. Plus tip.
L.A. County says it amounts to an illegal “bait-and-switch.”
In a lawsuit filed Wednesday against Grubhub, county lawyers argue the food delivery company has repeatedly flouted a state law barring false advertising by promoting meals at a cheaper price than what customers see at the checkout page.
In a national first, New York City is implementing a minimum pay rate for app-based food delivery workers.
“Grubhub has built this vast marketplace through practices that mislead consumers and restaurants and put the squeeze on the company’s delivery drivers,” the lawsuit says. “Multiple aspects of Grubhub’s business — and every transaction for food delivery — are suffused with deception.”
A Grubhub spokesperson said in a statement the company plans to “aggressively defend” itself in court.
“We’ve sought to engage in a constructive dialogue with the Los Angeles County Counsel’s office to explain our business and identify any areas for improvement,” a company spokesperson wrote. “We are disappointed they have moved forward with this lawsuit because our practices have always complied with applicable law, and in any event, many of the allegations are incorrect or have been discontinued.”
The lawsuit refers to a Grubhub webpage with a banner that says customers can “order online for free” at Los Angeles restaurants near them. In reality, the lawsuit says, they cannot.
Grubhub said it is working on removing the language “from all existing materials.”
“This lawsuit sends a clear message: Los Angeles County will not tolerate businesses that deceive consumers, take advantage of restaurants, and exploit the drivers who work hard to provide a valued service,” said Supervisor Lindsey Horvath, the board chair, in a statement.
It’s the latest government action aimed at preventing companies from hitting consumers with surprise charges. A new state law goes into effect this summer prohibiting last-minute “junk fees” across a long list of businesses, including delivery apps. Atty. Gen. Rob Bonta, who co-sponsored the measure, has promised “the price Californians see will be the price they pay.”
The attorney general’s office has said that once the law goes into effect, delivery apps cannot tack on miscellaneous fees at the end of the transaction.
The county’s lawsuit argues the status quo hurts not only Grubhub’s customers, but also the drivers and restaurants who serve them.
According to the lawsuit, restaurants signing up for Grubhub were not properly warned that they would have to refund money to dissatisfied customers even if the restaurants didn’t believe they had made a mistake with the order. Restaurants are also at a disadvantage if they don’t pay the company extra marketing fees, the county alleged.
Grubhub gives more search prominence to restaurants that pay more in marketing fees, though most customers likely don’t realize this, the suit alleges. Instead, customers may believe the restaurants they’re seeing higher in the search ranking are the closest or the most popular.
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“These practices inflict financial harm on L.A. County’s residents, restaurants and workers and are unacceptable while so many of them struggle to make ends meet,” Rafael Carbajal, director of the county’s Department of Consumer and Business Affairs, said in a statement.
Grubhub came under fire from its California delivery drivers in 2020 after the company rolled out a new charge — called the driver benefits fee — to help cover the costs that came under Proposition 22, a voter-approved ballot measure that guaranteed delivery drivers who clock a certain number of hours a healthcare stipend, among other benefits.
As part of the rollout, the company defaulted to no tip. Drivers said their earnings were slashed as a result.
The lawsuit alleges the way Grubhub explains the driver benefits fee continues to deter customers from tipping.
Grubhub explains the fee to consumers as helping guarantee “minimum wage and healthcare benefits for our drivers so they don’t have to depend on tips,” the lawsuit says. In reality, many drivers don’t qualify for the stipend and are fully dependent on tips, the county alleges.
Grubhub said the company has worked to make it easier for restaurants to dispute refunds and plans to clarify the benefits drivers receive as a result of Proposition 22. It also said marketing fees only affect the searches customers see in “certain, limited circumstances.”
In 2022, Grubhub settled a similar suit with Washington, D.C., for $3.5 million after the district’s attorney general accused the company of manipulating customers with “hidden fees.” Under the settlement, Washington received $800,000, and $2.7 million went back into the accounts of Grubhub customers.
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