On July 29, Massachusetts Attorney General Maura Healy sued third-party food delivery giant Grubhub for allegedly charging restaurants in the state illegally high delivery fees during the COVID-19 pandemic. According to the economic development bill implemented by the Massachusetts legislature in January, which was intended to help businesses struggling through COVID, third-party delivery apps like DoorDash, Grubhub, and Uber Eats were not permitted to charge restaurants more than 15 percent fees per delivery for as long as the state of emergency lasted in the state.
Healy’s lawsuit, filed in Suffolk Superior Court, demands refunds for restaurants impacted by Grubhub’s allegedly unlawful tactics and alleges that Grubhub violated a provision of the state’s economic development legislation regarding the 15 percent fee cap.
“We allege that Grubhub knowingly and repeatedly violated the fee cap statute, raising costs by thousands of dollars and harming restaurants that were already financially distressed and trying to survive,” said AG Healey via press release. “We are suing to get money back to these establishments and to hold Grubhub accountable for its unlawful conduct. Our restaurants have been hard hit by this pandemic and we will do everything we can to help get them the relief they need to recover.”
Grubhub “strongly disagrees with the allegations in this lawsuit,” a spokesperson tells Eater. “While we do not believe the temporary price control was either legal or appropriate, we complied with it while it was in effect and for an additional month after it expired, effectively conveying millions of dollars to local restaurants across Massachusetts. We look forward to responding to these baseless allegations.”
Restaurant operators fought for months on end to get city and state legislators to implement fee caps on third-party delivery apps. The Boston City Council debated it on at least one occasion but eventually passed the buck to the state legislature, which didn’t act until nearly a year after the pandemic broke out, costing local restaurants untold amounts of money in the process.
Now that the state of emergency is no longer in place — Gov. Charlie Baker lifted it on June 15 — third-party delivery apps are free to charge what they wish per delivery. Some restaurants have reported delivery fees as high as 30 percent. Steep fees cut deep into a restaurant’s margins, which are already razor thin, and have prompted cities across the country to enact temporary fee caps during the pandemic. San Francisco went a step further, enacting a permanent cap on third-party delivery fees last month. (The delivery apps weren’t happy about that.)
It remains to be seen if San Francisco will be the exception or the rule — and it might depend on how much time Grubhub and its delivery cohorts want to spend in court.
Update, 3:20 p.m.: This piece has been updated to include a statement from a Grubhub spokesperson.
• Massachusetts Legislature Implements Fee Caps for Third-Party Delivery Apps Like Grubhub and DoorDash [EBOS]
• Beacon Hill Must Cap Food Delivery Fees Imposed by DoorDash, UberEats, GrubHub [BG]
• Will Permanent Fee Caps Actually Rein in Delivery Apps? [E]