Grubhub’s Pricing, Advertising Practices at Stake in DC’s Lawsuit

Delivery apps are the to-go option for many people when it comes to prepared meals, groceries or other products. Sometimes, delivery apps even offer lower prices than in-person shopping venues — thus, this business model offers unrivaled convenience to buyers. Despite its perks, a series of several lawsuits against many of the most prominent delivery companies is calling into question the relationship between firms and their consumers. 

For instance, in 2019 Washington, D.C., reached a settlement with DoorDash after alleging the company misled customers about how much drivers received in tips. The applications have responded with cases against local authorities. DoorDash, Grubhub and Uber Eats sued New York City for its price caps in September 2021. 

This week, one of the issues that will be discussed in a courtroom is the use of drip pricing and dark patterns. Drip pricing is a business practice by which only a part of a product’s price is disclosed to potential buyers. Accordingly, the total price is only revealed at the very end of the buying process. U.S. regulators have done little to police drip pricing. European regulations, in contrast, have mandated that firms disclose taxes, fees, and surcharges upfront. Canada’s competition authority has imposed hefty fines to companies (and their managers) who have dripped prices, arguing that such a practice is misleading and abusive. But the U.S. landscape may be changing. 

The District of Columbia just sued food delivery company Grubhub, accusing the business of “deceptive trade practices” such as excessive fees, out-of-date restaurant prices and false advertising. The complaint states that Grubhub listed more than 1,000 “partner restaurants” available for delivery in D.C. that had no contracts with Grubhub, and added the restaurants to the platform’s directory without the owners’ consent. According to the complaint, “[t]his deceptive conduct significantly impacted District of Columbia consumers, as the menu offerings, prices, and hours for Non-Partner Restaurants were more likely to be out-of-date or incorrect, and there was a greater likelihood that orders from those restaurants would take longer to fill, would be filled incorrectly, would be delivered cold, or would eventually be cancelled altogether.”  

The complaint alleged prices for local restaurants on the app and website were typically higher than in-store prices, despite Grubhub saying they were the same. Consumers also had to pay various fees, such as a delivery fee, service fee and small order fee for purchases under $10. Furthermore, other fees would apply at checkout despite advertising saying customers would only have to pay a delivery fee. “Moreover, until recently, even when consumers got to the checkout page, Grubhub further obscured those fees by combining them in the same line item as ‘taxes.'” 

According to the suit, the defendant’s practice is a digital “dark pattern.” These are manipulative practices that deceive, coerce, or manipulate consumers into making choices that are either not what they intended or not in their best interests. Regulators and policymakers in Europe and the U.S. are addressing dark patterns. In Europe, the recently-adopted Digital Service Act explicitly prohibits tech companies from using “dark patterns” to influence users’ behavior. In the U.S., the California Privacy Rights Act of 2020 (“CPRA”), which is intended to strengthen California’s landmark data privacy law, California Consumer Privacy Act (“CCPA”), is the first of its kind to mention “dark patterns.” The Federal Trade Commission (FTC) has also pursued enforcement actions involving dark patterns for years. 

However, the DC complaint shows how local enforcers may use existing legislation to tackle manipulative pricing practices. Drip pricing qualifies as a dark pattern because it leads consumers to believe the final price is lower than it actually is. But there are many other different types of dark patterns that, for instance, allow websites to collect people’s data thanks to the use of more and less prominent options. One may think that because dark patterns may mislead consumers, markets would tend to self-correct. However, dark patterns are so widespread in marketplaces that legislators decided to act. 

Regulation can be one remedy to add more transparency to the market, but it is not the only one. For instance, the Consumer Financial Protection Bureau (CFPB) opened a public consultation in February to gather information about “junk fees,” which may include drip pricing practices. The CFPB could use the results of this consultation to advocate for changes in the pricing system without resorting to rulemaking or enforcement actions. 

Read More: Consumers Want It Now — And Delivery Services Are Responding