FOOD DELIVERY service Grubhub agreed to pay over $3.5 million to hundreds of Massachusetts restaurants to settle charges that the company overcharged them during the pandemic.
The settlement comes as a result of a 2021 lawsuit brought by the attorney general’s office against Grubhub for violating a pandemic policy which capped the markup that third-party delivery service platforms like Grubhub could charge restaurants. A Superior Court judge ruled against Grubhub in March, and allowed the two parties to work out the specific terms of the settlement.
“While we have always complied with Massachusetts’ temporary price control, we’re ready to move forward from this situation and continue providing Massachusetts restaurants with the best possible service,” said a Grubhub spokesperson in an email statement.
Grubhub makes its profit by charging fees to restaurants per customer order and the fees are calculated as a percentage of each order. During the pandemic, the Commonwealth enacted a law which prohibited platforms like Grubhub from charging fees that exceeded 15 percent of an order’s restaurant menu price. The law was passed during the pandemic when in-person dining at restaurants was either completely not allowed or limited.
The fee cap was in place between January 14, 2021, and June 15, 2021. According to the attorney general’s lawsuit, Grubhub regularly charged hundreds of restaurants fees of 18 percent or more during the period of the fee cap. Specifically, Grubhub charged a 3 percent fee for “collecting payments, fraud monitoring, and customer care” in addition to the 15 percent fee allowed for “marketing and delivery.”
The lawsuit claimed that Grubhub’s actions led to significant financial harm for the restaurants that were overcharged and that it raised restaurant costs by thousands of dollars. At the time, the owners of El Jefe’s Taqueria and Felipe’s Mexican Taqueria in Cambridge paid approximately $8,200 and $12,000, respectively, in order processing fees that were in addition to the 15 percent cap. Both restaurants complained to Grubhub but Grubhub argued that the 15 percent cap did not apply to order processing fees.
In addition to the $3.5 million that Grubhub will pay to impacted restaurants, the company will also pay a $125,000 penalty to the Commonwealth.
John Schall, the owner of El Jefe’s Taqueria, said the settlement will be helpful to a lot of restaurants that were affected by Grubhub’s practices.
The head of the Massachusetts Restaurant Association, Stephen Clark, said it’s important for delivery platforms to collaborate with restaurants. “While the dark days of the pandemic are behind us, the impacts are still being felt across the restaurant industry,” said Clark. “Delivery, especially third-party delivery, is not going away. Restaurants and third-party delivery companies will need to continue to work collaboratively to survive and grow.”
