L.A. County suing Grubhub, alleging shady business practices

Citing alleged deceptive business practices, Los Angeles County filed a lawsuit against food-delivery service Grubhub on Wednesday, according to officials.

The lawsuit accused the food-delivery giant of several practices the county deemed to “take advantage” of consumers, drivers and restaurants.

“This lawsuit sends a clear message: Los Angeles County will not tolerate businesses that deceive consumers, take advantage of restaurants, and exploit the drivers who work hard to provide a valued service,” said Los Angeles County Board Chair Lindsey P. Horvath in a news release. “Our County Counsel and Department of Consumer and Business Affairs are standing up for consumers and businesses by fighting these unfair practices.”

In a statement provided to KTLA 5 by a company spokesperson, Grubhub said the following:

“We work hard to support Los Angeles restaurants, diners and drivers, and we continually review and enhance our operations to better serve them and meet their expectations. We’ve sought to engage in a constructive dialogue with the Los Angeles County Counsel’s office to explain our business and identify any areas for improvement. We are disappointed they have moved forward with this lawsuit because our practices have always complied with applicable law, and in any event, many of the allegations are incorrect or have been discontinued. We will aggressively defend our business in court and look forward to continuing to serve LA restaurants, diners and drivers.”

The 51-page suit includes several instances of Grubhub advertisements clearly telling consumers they can order food online from Los Angeles-area restaurants “for free,” before allegedly charging hidden fees at checkout. Grubhub told KTLA that these practices were “discontinued,” and all that fees are now disclosed prior to purchase.

Another accusation is levied against the mobile application’s listing of restaurants. Instead of sorting vendors by “relevance,” the suit says that the list is instead ordered based in part on how much advertising money they pay for their spot.

Grubhub refuted that claim, saying search algorithms factor in “location, restaurant category and consumer’s past ordering behavior.”

The suit says the introduction of “drivers’ benefit fees” in 2020 led to a potential decrease in tips for workers based on misleading language. The fees, which currently range between $1-3, go toward healthcare subsidies that were introduced in California through Proposition 22.California Proposition 22: Classifying Uber and Lyft drivers as contractors, not employees

However, according to L.A. County, most drivers don’t qualify for those benefits, leading to the belief that “consumers no longer need to tip their drivers because ‘they don’t have to depend on tips.’” In multiple instances depicted in the lawsuit, pieces of text on the app’s checkout screens told consumers they could “leave an optional tip on top of driver benefits.”

“Grubhub clearly provides information to drivers about Proposition 22 through ongoing communications and a dedicated, publicly available resource page,” the spokesperson said. “Although we do not believe the language is in any way misleading, going forward, Grubhub will update the language diners see on the checkout page to further clarify the benefits drivers receive from Proposition 22.”

Restaurants suffered from the business practices as well, the suit alleged, saying that Grubhub has full discretion on when and how to offer customers full refunds on their food. This means the company can issue a refund on the restaurant’s behalf, leaving it to foot the bill — even if the refund was requested because of issues with the delivery.

Grubhub said the refund policy was changed last year, and it’s now easier for restaurants to dispute claims.

The suit asks that Grubhub permanently be disallowed from engaging in the practices listed, and they the company pay fines and restitution.

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