DC's attorney general sued Grubhub, accusing it of deceiving customers and exploiting restaurants during the pandemic

• AG Karl Racine filed a lawsuit against Grubhub on Monday.
• The lawsuit accuses Grubhub of using various deceptive practices to beef up its profits.

The attorney general of Washington DC filed a lawsuit against food-delivery company Grubhub on Monday, accusing the company of misleading customers with hidden fees and exploiting local restaurants.

"Grubhub misled District residents and took advantage of local restaurants to boost its own profits, even as District consumers and small businesses struggled during the COVID-19 pandemic," Attorney General Karl Racine said in a press statement.

Grubhub merged with European takeaway company JustEat in June 2021 after losing market share to competitors including DoorDash and Uber Eats. Racine's lawsuit marks another blow to the company.

Racine's lawsuit contains eight complaints against the company, including that it used illegal hidden fees and "bait-and-switch" marketing ploys.

The lawsuit says Grubhub advertised "free delivery" to customers signing up to its subscription service Grubhub Plus, but failed to tell customers it was still charging them a "service fee."

"Consumers don't mind paying for delivery fees, but Grubhub needs to be honest about those fees in the first place," Racine said in his press statement.

Grubhub's corporate communications director, Katie Norris, told Insider in a statement that the company does not misrepresent its fees.

"Grubhub's Terms of Use — to which every diner agrees before using Grubhub's platform — disclose that Grubhub may charge fees on goods and services obtained through its platform," she said, adding fees appear as customers checkout their orders and in marketing materials.

Racine also accused Grubhub of using a pandemic campaign called "Supper for Support" to cut into restaurants' profits.

Beginning in March 2020, "Supper for Support" offered $10 discounts to customers on orders over $30.

Although it was marketed as a way to help local restaurants during lockdown, Racine's suit says Grubhub required restaurants to shoulder the cost of the $10 discount and had to pay Grubhub commissions based on the non-discounted cost of customer orders.

Norris said the Supper for Support program was not deceptive.

"The terms of the Supper for Support program were clearly disclosed to restaurants, and they could decide if they wanted to participate or not," said Norris, adding that Grubhub never implied it would shoulder the cost of the discount to customers.

The lawsuit also accuses Grubhub of charging more for products than they cost on restaurant menus, and of listing thousands of restaurants that had not actually entered into a contract with Grubhub.

Norris told Insider Grubhub "does not list restaurants on its website or app in DC where no agreement exists, in line with DC's law."

She also said that, going forward, the app will show customers an alert before they place an order saying: "Prices may be lower in store."

Norris said the company will fight the charges leveled against it by Racine.

"During the past year, we've sought to engage in a constructive dialogue with the DC Attorney General's office to help them understand our business and to see if there were any areas for improvement," said Norris.

"We are disappointed they have moved forward with this lawsuit because our practices have always complied with DC law, and in any event, many of the practices at issue have been discontinued. We will aggressively defend our business in court and look forward to continuing to serve DC restaurants and diners," she added.