BOSTON — Massachusetts Attorney General Andrea Campbell on Friday announced a $3.5 million settlement with online food delivery service platform Grubhub.
The settlement resolves a 2021 lawsuit filed by Campbell alleging that Grubhub illegally overcharged restaurants in Massachusetts in violation of a state rate cap put in place during the COVID-19 health emergency public health.
Under the terms of the settlement, Grubhub will pay a total of more than $3.5 million to the affected restaurants, Campbell said. Grubhub will also pay $125,000 to the state.
“Grubhub unlawfully overcharged and took advantage of restaurants during a public health emergency that devastated much of this industry,” Campbell said in a statement.
A company spokesperson said restaurant serving is “at the core of everything Grubhub does.”
“Our success depends on these valuable trading partners. While we have always adhered to the temporary price control in Massachusetts, we are prepared to exit this situation and continue to provide Massachusetts restaurants with the best possible service,” the spokesperson said in a written statement.
Grubhub partners with restaurants to provide online ordering and delivery services for customers and charges contracted restaurants per customer order. The fee is generally charged as a certain percentage of the restaurant’s menu price for each order.
Massachusetts declared a public health emergency during the height of the COVID-19 pandemic.
During the emergency — as public traffic to restaurants plummeted and diners became increasingly reliant on delivery — lawmakers passed legislation banning Grubhub and other third-party delivery service platforms from charging restaurants higher than 15% of the restaurant menu price of an order.
The rate cap remained in effect between January 14, 2021 and June 15, 2021, when former Governor Charlie Baker lifted the state of emergency in Massachusetts.
The AG’s lawsuit, filed in July 2021, alleged that Grubhub repeatedly violated the 15% fee cap by regularly charging fees of 18% or more, resulting in significant financial harm to restaurants by often driving their operating costs increase by thousands of dollars.
In March 2023, the Suffolk Superior Court ruled in favor of the state. The ruling indicated that Grubhub’s conduct had violated both the 15% statutory rate cap and the state’s primary consumer protection statute, Campbell said.
Restaurants that may be eligible for money from the settlement will be contacted, Campbell said.
Stephen Clark, president and CEO of the Massachusetts Restaurant Association, said restaurants are grateful for the settlement and that the money will go back to the restaurants that worked hard to survive and serve customers during the pandemic.
“While the dark days of the pandemic are behind us, its effects are still being felt throughout the restaurant industry. Delivery, and especially third-party delivery, is not going away. Restaurants and third-party delivery companies will need to continue working together to survive and grow,” he said in a statement.