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Grubhub has agreed to pay more than $3.5 million to resolve a lawsuit by Massachusetts’ attorney general accusing the company of illegally charging restaurants that used its online food delivery platform excessive fees during the COVID-19 pandemic.
Massachusetts Attorney General Andrea Joy Campbell said Friday’s settlement resolved a lawsuit filed in 2021 that alleged the company charged restaurants fees that exceeded a cap the state imposed during the public health emergency.
Numbers show that the Covid-19 pandemic resulted in a significant increase of meals ordered online through food delivery apps and websites. (Beata Zawrzel/NurPhoto via Getty Images / Getty Images)
Grubhub, a subsidiary of Just Eat Takeaway.com, will pay over $3.5 million to impacted restaurants and $125,000 to the state, according to Campbell’s office.
A spokesperson for Grubhub in a statement said that while it believed it complied with the price cap, it was “ready to move forward from this situation and continue providing Massachusetts restaurants with the best possible service.”
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As in other states, then-Governor Charlie Baker issued a series of emergency orders at the onset of the pandemic in March 2020 aimed at curtailing the spread of the coronavirus that banned large gatherings and required nonessential businesses to close.
Restaurants and bars were barred from offering on-premise consumption of food, but were allowed to remain open and offer takeout. Baker later relaxed those orders and allowed for outdoor and limited indoor dining.
The Grubhub logo on a smartphone in the Brooklyn borough of New York, US, on Friday, July 8, 2022. (Gabby Jones/Bloomberg via Getty Images / Getty Images)
With restaurants suffering financially, the state in January 2021 enacted a law that limited the fees Grubhub and other third-party ordering platforms could charge restaurants to 15% of an order’s purchase price.
Similar fee caps were enacted by the state of Washington and some major cities like New York, San Francisco, Cincinnati and Seattle, some but not all of which became permanent.
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Massachusetts’ fee cap remained in place only from Jan. 14, 2021, to June 15, 2021, when Baker lifted the state of emergency.
The lawsuit, filed by Campbell’s predecessor as attorney general, now-Governor Maura Healey, alleged that Grubhub violated the fee cap by regularly charging fees of 18% or more.
A delivery worker rides his bike on July 07, 2023 in New York City. ((Photo by Leonardo Munoz/VIEWpress) / Getty Images)
Grubhub’s lawyers, led by Joshua Lipshutz of Gibson, Dunn & Crutcher, argued that it complied with the law by lowering commissions to 15% but that separate processing fees for credit card transactions of around 3% were not covered by the statute.
But Suffolk Superior Court Judge Robert Gordon in March ruled the law broadly covered all fees. He said that to rule in Grubhub’s favor would require him to “conclude (implausibly) that an order processing fee is somehow not a fee at all.”
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The judge as a result found Grubhub liable. The state, which was seeking refunds for the restaurants, and the company then entered into settlement talks that mooted a potential trial.
The case is Commonwealth of Massachusetts v. GrubHub Holdings Inc et al, Suffolk Superior Court, No. 2184CV01719.
