In late November, the Pennsylvania AG’s office announced a settlement with Grubhub. In its action, the AG alleged among other claims that Grubhub’s platform did not clearly disclose to consumers that they were sometimes charged higher prices for items ordered through the platform compared to ordering from the restaurant directly. Attorney General Shapiro settled for $125,000 in food bank donations and changes to its practices.
To address the AG’s disclosure concerns, Grubhub is required to make additional clear and conspicuous app and website disclosures informing consumers about the potential for higher prices with their service. The AG further alleged that Grubhub concealed the fact that it used third party websites to promote certain restaurants using their own routing numbers as contact information, which may have misled customers into believing they were viewing the restaurant’s own contact information. To resolve this allegation, the settlement requires Grubhub to “shut down all Microsites for Pennsylvania restaurants or transfer ownership” and provide a clear and conspicuous disclosure for certain restaurants stating that the company is not an authorized delivery service and directing the customer to the restaurant directly.
Pennsylvania’s settlement follows a March 2022 lawsuit against Grubhub brought by the DC Attorney General. AG Racine raised similar allegations regarding a failure to disclose that prices were higher in store and concealing fees by obscuring them in a tax line item. Attorney General Racine went so far as to refer to these practices as dark patterns, a hot topic for federal and state regulators. The DC Office raised its own concerns about third-party restaurant information, noting how incorrect menu items, prices, and hours would result in errors, delays, or cancellations for a customer’s order. Finally, they added an allegation that Grubhub misled consumers into believing they were supporting restaurants during a Covid-19 pandemic promotion, when local restaurants did not benefit financially from the promotion. The DC office has focused on making sure consumers understand who their payments are benefiting, having previously reached a settlement with DoorDash regarding its tip disclosures.
While the Pennsylvania and DC actions may be focused on food delivery, any businesses that adds usage fees should adhere to some basic principles to ensure they won’t fall on the radar of a State AG:
- Disclose all additional charges.
- Clearly disclose what additional charges are for and who they will be paid to.
- Disclose pertinent information to consumers in making a transaction, ensuring customers understand who or what business their money is really benefiting.
- Ensure any Covid-19 or other charitable promotions or fees are non-misleading.
While businesses may look to include such information in the terms of service, enforcers will expect these material disclosures to be in a clear and conspicuous place where customers will see the information prior to a transaction. And it may be an obvious point, but businesses should be transparent about their own identity, and don’t try to appear as a different business through misleading websites. We will continue to keep you updated as State AGs shape their priorities for 2023.