Chicago Raises New Allegations in Lawsuit Against Grubhub

In late 2021, nearly six months after officials first filed a lawsuit against third-party delivery giant Grubhub, the city of Chicago filed an amended complaint that includes new allegations that the locally based company “used deceptive marketing and pricing practices designed to mislead consumers and unfairly harm the same local restaurants Grubhub claims to support,” officials announced Tuesday morning.

The city filed the amended complaint on December 27, 2021 in Cook County circuit court, but officials issued a news release more than a month later as “some indicated they weren’t able to find the amended complaint,” according to a rep. Its contents are the result of an ongoing investigation by the city and — as in the original from August — contains details from Chicago restaurants who claim the company uses bait-and-switch tactics to dupe customers and undermine restaurants navigating extreme financial challenges during the ongoing COVID-19 pandemic.

Attorneys for the city listed a multitude of allegations in the complaint, including charging restaurants for Grubhub-issued customer refunds, advertising free online ordering while still charging delivery fees, and manipulating restaurant search tools on its website based on “undisclosed marketing fees.” It also addresses the company’s pandemic-era “Supper for Support” promotion, which the city claims took advantage of public goodwill toward struggling businesses and misrepresented the true cost of the program to restaurants:

Grubhub’s “Supper for Support” promotion, which offered consumers $10 off orders of $30 or more, entreated consumers to “help save the restaurants we love” by placing orders through the Grubhub Platform. Grubhub misrepresented Supper for Support as a win-win opportunity for consumers and restaurants. In reality, Grubhub required that participating restaurants cover the steep cost of the discount and charged them Grubhub’s full commission on the pre-discount order price.

In August, a representative from Grubhub said that participating restaurants knew about the specifics of the program and were not misled.

In recent years, restaurant owners in the city have raised concerns about the company’s business practices — chief among them, frustrations over unsolicited and unwanted online restaurant listings that imply a partnership with Grubhub that doesn’t actually exist. James Beard Award-winning chef Beverly Kim told Chicago’s city council in May 2020 that she felt so “violated” by Grubhub’s unauthorized listing of her Michelin-starred restaurant Parachute that she posed as a customer and placed a delivery order to see what would happen, according to the complaint. When a Grubhub driver arrived, the Avondale restaurant — which doesn’t offer delivery — refused to fill the order. When Kim followed up on her purchase, she says the company cast blame on Parachute, claiming the problem stemmed from her own restaurant’s delivery system.

The complaint alleges that Grubhub’s response to Kim’s query is baked into its business model: the city claims that in the case of “unaffiliated restaurants” — that is, those who don’t partner with Grubhub — its drivers are instructed to impersonate customers and place the orders themselves, allowing restaurants to believe they are individual patrons rather than third-party employees.

These unaffiliated listings also tend to include old or inaccurate menu items that the restaurant no longer offers, which can mean even more unhappy customers when a delivery doesn’t arrive as ordered. The city’s attorneys cite the experience of Lacey Irby, owner of Lakeview’s Dear Margaret, who in May 2021 told Eater, “It is absolutely ludicrous to me that third-party ordering platforms like Grubhub can list a restaurant on their website without the restaurant’s consent, let alone take orders based off old, incorrect menus. It might as well be called restaurant catfishing — and just imagine how customers must feel after being duped, too!”

The city’s first lawsuit filed in August 2021, alongside a separate suit against delivery brand DoorDash, was the first suit in the country to cover a wide swath of issues in one filing. Other municipalities have homed in on a single issue, including a suit filed in July by Massachusetts’s attorney general that accuses Grubhub of violating a fee cap. Chicago issued its own fee cap in November 2020, limiting third-party couriers to a 15 percent fee for delivery services, which it claims Grubhub is also breaching.

Grubhub responded in court to the city’s complaint the same day, filing a motion to dismiss that describes the city’s complaint as “specious.” The company claimed it has always put diners first, especially during the pandemic, and actually lost money as it spent “tens of thousands of dollars on initiatives to support diners, drivers, and restaurants.” Furthermore, the response continued, the city failed to demonstrate that Grubhub had actually harmed the diners themselves. Grubhub claims it has always made its policies perfectly clear and has cooperated fully with the city in providing information and answers to questions.

A Grubhub spokesman was skeptical of the timing of the news release. “As further demonstrated by this curiously-timed news release,” he wrote in an email to Eater, “Mayor Lightfoot’s lawsuit is about publicity—not law—and does nothing to support Chicago’s restaurants. Her allegations remain categorically wrong, as we articulated in great detail in our response to the court last month.”

Damages could fall anywhere in a wide range, as the city isn’t seeking an exact sum: officials want Grubhub to follow existing rules, and the complaint asks for $2,000 to $10,000 for every offense or party harmed.

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