By Craig Clough
August 27, 2021
The city of Chicago filed lawsuits against Grubhub and DoorDash on Friday, accusing the food delivery companies of using various deceptive practices to fool customers into paying higher prices, with the city’s mayor also chastising the companies for trying to “take advantage” of restaurants and consumers during the COVID-19 pandemic.
Chicago claims in the lawsuits that the companies are in violation of the city’s municipal code by advertising order and delivery services from restaurants without their consent, engaging in bait-and-switch tactics by jacking up the price at the end of a delivery and advertising menu prices higher than if a customer ordered directly from the restaurant.
There are also a number of claims specific to only one of the companies, including that Gubhub creates and maintains “impostor websites” that look like real restaurants’ sites but just drive customers to Grubhub, and that DoorDash imposes a misleading “Chicago fee” of $1.50 on every order, leading customers to believe the fee is a city tax of some sort when DoorDash pockets the entire sum.
“As we stared down a global pandemic that shuttered businesses and drove people indoors, the defendants’ meal delivery service apps became a primary way for people to feed themselves and their families, as well as support local restaurants,” said Chicago Mayor Lori E. Lightfoot in a statement. “It is deeply concerning and unfortunate that these companies broke the law during these incredibly difficult times, using unfair and deceptive tactics to take advantage of restaurants and consumers who were struggling to stay afloat.”
The city is seeking among other things injunctive relief that would include changes to the companies’ practices, restitution for restaurants and consumers and civil penalties.
According to the city, Grubhub also publishes deceptive “routing” telephone numbers that appear to be restaurants’ real numbers while charging commissions even when the calls don’t end in an order, and of violating the city’s emergency cap of 15% on restaurant commissions.
Grubhub also launched deceptive advertising campaigns to “save restaurants,” all while forcing partner restaurants to extend their contracts, pay for the promotions and pay full commissions on all orders, Chicago said.
DoorDash, meanwhile, misleads customers into believing they were tipping drivers directly when the tip was just subsidizing DoorDash’s costs, according to Chicago.
“We discovered that Grubhub and DoorDash have been engaging in deceptive and misleading business practices that harm consumers and exploit restaurants,” Chicago’s acting Business Affairs and Consumer Protection Commissioner Kenneth Meyer said in a statement. “These practices continued unabated during the pandemic when restaurants were struggling to survive.”
In a statement, DoorDash said the lawsuit “is baseless. It is a waste of taxpayer resources, and Chicagoans should be outraged. DoorDash has stood with the city of Chicago throughout the pandemic, waiving fees for restaurants, providing $500,000 in direct grants, creating strong earning opportunities and delivering food and other necessities to communities in need. This lawsuit will cost taxpayers and deliver nothing.”
Grubhub said in a statement that it is “deeply disappointed by Mayor Lightfoot’s decision to file this baseless lawsuit. Every single allegation is categorically wrong and we will aggressively defend our business practices. We look forward to responding in court and are confident we will prevail.”
Chicago said in a statement that the suits are the first comprehensive law enforcement actions against meal delivery companies in the country, although both companies are battling some similar claims in other jurisdictions brought by both public entities and private parties.
In New York City, a bakery filed a proposed class action accusing Grubhub of violating New York City’s 20% cap on delivery service fees, while Massachusetts Attorney General Maura Healey sued Grubhub in July, claiming the food delivery service platform charged Bay State restaurants excessive fees outside the cap in place during the COVID-19 public health emergency.
Two federal lawsuits in California were also sent to arbitration last year that accuse DoorDash of deceptively using customers’ tips to meet minimum base pay for drivers,
The city is represented in-house by Stephen J. Kane, Elie Zenner and Rachel Granetz, and Betsy A. Miller, Brian E. Bowcut and Johanna M. Hickman of Cohen Milstein Sellers & Toll PLLC
Counsel information for DoorDash and Grubhub was not immediately available Friday.
The cases City of Chicago v. DoorDash Inc. et al., case number unavailable, and City of Chicago v. Grubhub Holdings Inc., case number unavailable, both in the Circuit Court of Cook County, Illinois County Department, Chancery Division.