Details on the Landmark $3.5M Grubhub Lawsuit Settlement
On Friday, January 19th, 2024, the State of Massachusetts announced a $3.5 million settlement with online food delivery service platform, Grubhub. The settlement resolves a 2021 lawsuit filed by the state, alleging illegal overcharging of fees to Massachusetts restaurants during the COVID-19 public health emergency. Grubhub will pay over $3.5 million to impacted restaurants as part of the settlement. Additionally, Grubhub will pay $125,000 to the state. As a restaurant owner, you may be wondering what led to the lawsuit and how Grubhub’s actions impacted the restaurant industry as a whole. In this blog, we’ll cover all the essential information about the Grubhub lawsuit and their settlement with the State of Massachusetts.
Firstly, it’s essential to understand what led to the lawsuit. Grubhub was sued in July 2021 by the Massachusetts Attorney General Andrea Campbell, for charging restaurants illegally high commission fees. The lawsuit claimed that Grubhub was violating the state’s rules against charging more than 18% commission fees to restaurants during the pandemic. This action took place when many states were mandating restaurants to suspend indoor dining and increase takeout services.
During the height of the COVID-19 pandemic, Massachusetts declared a public health state of emergency and passed legislation that capped fees charged to restaurants by third-party delivery platforms at 15% of the order’s restaurant menu price. This fee cap was in effect from January 14, 2021, until June 15, 2021, when the state of emergency was lifted.
During the pandemic, many restaurants relied on Grubhub to scale up their takeout businesses. However, the platform allegedly took advantage of the situation to impose fees of 18% or more that went beyond their contractual agreements with their partnering restaurants. The lawsuit claims that Grubhub has been operating these practices since 2014, but it aggravated during the pandemic.
Furthermore, the Grubhub lawsuit is not an isolated case as numerous restaurants have been pushing back on the company’s pricing policies, which they described as unfair. Restaurant owners have raised concerns about the high commission fees of up to 30% compared to rival delivery services, which prompted them to demand more transparent pricing policies.
The landmark settlement between the Massachusetts attorney general and Grubhub requires the online company to repay a $3.5 million dollar plus interest to the restaurants based in Massachusetts, who have been overcharged. The company will also pay a significant penalty amounting to $125,000 to the government. Restaurant owners who are eligible to receive funds will be contacted to collect their share of the settlement.
The Grubhub lawsuit and subsequent settlement have put the spotlight on unfair pricing policies of delivery platforms and their impact on restaurant businesses. As a restaurant owner, it’s necessary to stay informed on these issues and advocate for fair commissions and transparent pricing policies. Grubhub has agreed to follow the rules laid down per the settlement, and we hope that other delivery services will follow suit. Unreasonable fees are detrimental to restaurants and their growth, and it’s excellent news that the state of Massachusetts took action to protect the best interests of restauranteurs.
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