Massachusetts AG Sues Grubhub Over Fees Charged During Pandemic

ACCROSS MASSACHUSETTS — Attorney General Maura Healey is suing online food delivery service platform, Grubhub Holdings Inc.

In a lawsuit filed Thursday in Suffolk Superior Court, Healey claims the company illegally charged fees to Massachusetts restaurants that exceeded the statutory fee cap in place during the COVID-19 public health emergency. As part of the lawsuit, the attorney general is demanding refunds for restaurants that were harmed by "Grubhub’s unlawful practices."

The lawsuit alleges that Grubhub violated a provision of the state’s economic development legislation, which prohibited Grubhub and other third party delivery service platforms from charging fees to restaurants that exceed 15 percent of an order’s menu price. The fee cap came into effect on Jan. 14, 2021 and remained in place until June 15, 2021, when Gov. Charlie Baker lifted the state of emergency in Massachusetts.

“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. “We are suing to get money back to these establishments and to hold Grubhub accountable for its unlawful conduct. Our restaurants have been hard hit by this pandemic and we will do everything we can to help get them the relief they need to recover.”

Grubhub is a delivery service platform through which customers order restaurant food for delivery or pickup. Restaurants contract with Grubhub to use its services, which include advertising the restaurant’s menu, accepting and processing orders and payments, transmitting orders to the restaurant, and delivering orders to customers.

The attorney general's complaint alleges that Grubhub routinely and knowingly charged fees to restaurants that exceeded 18 percent of the order’s menu price, in violation of state law.

The lawsuit seeks to secure refunds for affected establishments, as well as civil penalties of $5,000 per violation, together with the costs of investigating and prosecuting the case.

In Feb, 2021, Healey sent letters to Grubhub and other online food delivery service platforms reminding them that a 15 percent fee cap was in place. In May 2021, she sent a cease and desist letter to Grubhub, ordering the company to cease charging covered establishments fees in excess of 15 percent of the menu price of the online order, in violation of the law.

According to Grubhub's website, it provides delivery services to restaurants that opt to use them, but the heart of the company's business - and the value brought to restaurants - is the marketing support and visibility the company provides to increase orders for restaurants. It says its fees are structured to give restaurant partners options so they can find what works best for their particular business.

"These fees closely reflect the direct cost of providing the services we do on behalf of restaurants. We spend hundreds of millions of dollars in marketing annually to generate orders for our restaurant partners. When all of the costs and expenses of running our business are accounted for, we typically make only 1 percent of total food sales as profit," the company writes in a recent blog post.

The case is being handled by Assistant Attorney General Michael Sugar and Legal Analyst Maggie Wallace, both of AG Healey’s Insurance and Financial Services Division.