DURING THE PANDEMIC, as restaurants pivoted to offering take-out meals rather than sit-down dining, they complained that third-party delivery apps were charging them exorbitant fees for providing delivery services. In response, the Legislature imposed a 15 percent cap on the commissions that apps like Grubhub and Uber Eats could charge restaurants during the COVID state of emergency.
But one major company – Chicago-based Grubhub – continued charging fees above 15 percent of a meal’s purchase price, according to a civil complaint filed Thursday by Attorney General Maura Healey in Suffolk Superior Court.
“We allege that Grubhub knowingly and repeatedly violated the fee cap statute, raising costs by thousands of dollars and harming restaurants that were already financially distressed and trying to survive,” Healey said in a statement.
Grubhub spokesman Grant Klinzman said in a statement, “Serving restaurants is at the heart of everything we do at Grubhub and we strongly disagree with the allegations in this lawsuit.”
The way Grubhub works is once a restaurant signs up for its services, the app lists the restaurant’s menu, processes orders and payments, transmits orders to the restaurant, and delivers the food – in exchange for a commission that is a percentage of the food’s purchase price.
According to the complaint, Grubhub charged a “marketing and delivery” fee that was 15 percent of the order price. It then charged another 3 percent fee for “collecting payments, fraud monitoring, [and] customer care.”
Grubhub charged the 18 percent fee to restaurants regardless of whether restaurants signed up for services before or after the cap went into effect. Even after restaurants complained that the fees exceeded the cap, Grubhub continued to charge the extra amount. Healey issued a cease and desist letter to Grubhub in May.
Healey wrote in the complaint that after the cap went into effect on January 14, 2021, two other major delivery companies – Uber Eats and Door Dash – changed their practices to conform with the fee limit.
The cap expired June 15, when the governor ended the COVID-19 state of emergency.
Healey is asking a judge to force Grubhub to refund all the money it collected through the excessive fees and pay civil penalties of $5,000 per violation.
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About Shira Schoenberg
Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.
About Shira Schoenberg
Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.
Grubhub has maintained that price caps are illegal because they invalidate contracts between private businesses. But, Klinzman said, the company did comply with Massachusetts law – and in fact maintained the lower restaurant fees for an extra month after the state of emergency expired. The company says the 3 percent fee is an order processing charge, which is a pass-through fee to cover credit card processing, fraud protection, undeliverable orders, customer care inquiries, and other requests that Grubhub handles on behalf of the restaurant. Grubhub says the restaurants would pay more to their own credit card processor if Grubhub were not involved.
“While we do not believe the temporary price control was either legal or appropriate, we complied with it while it was in effect and for an additional month after it expired, effectively conveying millions of dollars to local restaurants across Massachusetts,” Grubhub’s statement said. “We look forward to responding to these baseless allegations.”
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