Making their way into restaurants and homes, third-party delivery services have been exploding like never before. Since 2020, when restaurants relied more heavily on delivery orders to financially sustain themselves, the consumer demand for products to be delivered to their doorsteps has shown no signs of dying. While there are pros and cons to these services, Los Angeles County lawmakers are calling out food delivery giant GrubHub, alleging false and deceptive advertising, as well as misrepresentation and unfair business practices.
Third-party delivery companies, like GrubHub, rely on their partnerships with various restaurants and businesses, delivery drivers, and paying customers to sustain and increase revenue growth. Typically, these companies charge businesses a commission on each order, but they also attach delivery fees to customers, meaning third-party delivery companies often profit from customers and businesses.
LA County’s Lawsuit Against GrubHub: Key Allegations
The LA County lawsuit asserts that GrubHub’s business practices are financially harming partnering restaurants, their independent contractors who deliver, and paying customers. According to Los Angeles County Board Chair Lindsey P. Horvath, “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”—and the LA County is standing up for the businesses, drivers, and customers by facing off with the billion dollar business.
Impact on Restaurants, Drivers, and Customers
While LA County lawmakers allege that GrubHub’s business practices harm all parties involved, each party is impacted differently by their deceptive and unfair methods. GrubHub allows customers to use their app to place food and grocery orders, providing delivery services from partnering businesses to customers’ doorsteps. The LA County lawsuit argues that GrubHub uses deceptive advertising, claiming customers can place delivery orders online “for free,” but the company is actually charging customers fees on those orders at checkout. Luring customers with the promise of a flat, unqualified price for delivery, GrubHub’s fraudulent tactics deceptively add “service,” “small order,” and “driver benefits” fees upon checkout. There have been instances where the fees add up to more than the cost of the product.
Digging further into customers’ wallets, the lawsuit claims that GrubHub misrepresents restaurant search results, ignoring options that best fit the customers’ search in favor of restaurants that pay the company the most money for order placements. This practice harms not just the customer but the businesses who are being pushed aside for GrubHub’s preferential options and pay the food delivery provider more.
Altering customer search engine results is not the only way LA County alleges the company is hurting businesses. Lawmakers argue that GrubHub unilaterally charges restaurants for customer refunds, which the company issues to consumers without the restaurant’s consent or verifying who the responsible party is.
Also dependent on partnering businesses and paying customers are the delivery drivers, independent contractors depending primarily on customer tips. The lawsuit accuses GrubHub of misrepresenting the scope of the “Driver Benefits Fee,” leading customers to believe it covers healthcare for the driver and that there is no longer a need to tip, which also takes money out of drivers’ pockets.
LA County lawmakers are pursuing restitution for California consumers, restaurants, and drivers they believe have been harmed by the company’s deceptive tactics and paying civil penalties for their violations. The county urges any party who feels they’ve been hurt by GrubHub’s alleged actions to reach out to its Department of Consumer and Business Affairs.
As LA County’s lawsuit against GrubHub unfolds, the outcome could reshape how third-party delivery services operate. The case highlights significant concerns about transparency and fairness, impacting restaurants, drivers, and consumers alike.
