Back in 2020, a Wall Street Journal report revealed that Amazon employees routinely used data collected from third-party sellers to launch competing products for the company's private-label business. The US Congress is already investigating the e-commerce giant over that practice, and according to The Journal, so is the Securities and Exchange Commission. Apparently, the SEC is looking into how Amazon disclosed its business practices, including how its employees used data for its private-label brands.
As The Journal notes, the SEC is in charge of regulating how publicly traded companies communicate with their investors. It can impose fines and other enforcement actions against them if it finds that they had failed to disclose important business information to investors in a timely manner. As part of the probe, which has reportedly been underway for over a year now, the SEC asked for emails and other communications from several senior Amazon executives.
After the original report from The Journal came out, Amazon denied that it uses third-party seller data to launch competing products. It launched an internal investigation of its private-label division, but it refused to provide Congress a copy of its results. Last month, the House Judiciary Committee asked the Department of Justice to launch another investigation into Amazon over a possible criminal obstruction.
The committee said back then that the company refused to turn over business documents and communications "to conceal the truth about its use of third-party sellers' data to advantage its private-label business and its preferencing of private-label products in search results." As you'd expect, an Amazon spokesperson denied that's the case and referenced the "huge volume of information [the company has] provided over several years of good-faith cooperation with this investigation."
A company's public image is arguably even more important to its bottom line than the product they produce and very much not something to be trifled with. Would Disney be the entertainment behemoth it is today if not for its family-friendly facade, would Google have garnered so much goodwill if not for its "don't be evil" motto? Nobody's going to buy your cars if they think the company is run by some "pedo guy." With the scale of business that modern tech giants operate at and the amounts of money at stake, it's little surprise that these titans of industry will eagerly leverage their legal departments to quash even the slightest sullying of their reputations. But they can only Cease and Desist you if they can find.
In The United States of Anonymous: How the First Amendment Shaped Online Speech, associate professor of cybersecurity law in the United States Naval Academy Cyber Science Department and author Jeff Kosseff explores anonymity's role in American politics and society, from its colonial and revolutionary era beginnings, to its extensive use by the civil rights movement, to the modern online Damocles sword it is today. In the excerpt below, Kosseff recounts the time that Raytheon got so mad by posts on the Yahoo! Finance message board, that it tried to sue Yahoo! to give up the real life identities of three anonymous users so it could in turn sue them for defamation.
That was the title of a November 1, 1998, thread on the Yahoo! Finance bulletin board dedicated to tracking the financial performance of Raytheon, the mammoth defense contractor. Like many publicly traded companies at the time, Raytheon was the subject of a Yahoo! Finance message board, where spectators commented and speculated on the company’s financial status. Yahoo! allowed users to post messages under pseudonyms, so its Finance bulletin boards quickly became a virtual — and public — water cooler for rumors about companies nationwide.
The Yahoo! Finance boards largely operated on the “marketplace of ideas” approach to free speech theory, which promotes an unregulated flow of speech, allowing the consumers of that speech to determine its veracity. Although Yahoo! Finance may have aspired to represent the marketplace of ideas, the market did not always quickly sort the false from the true. During the dot-com boom of the late 1990s, Yahoo! Finance users’ instant speculation about a company’s financial performance and stock price took on new importance to investors and companies. But some of these popular bulletin boards contained comments that were not necessarily helpful to fostering productive financial discussion. “While many message boards perform their task well, others are full of rowdy remarks, juvenile insults and shameless stock boosterism,” the St. Petersburg Times wrote in 2000. “Some boards are abused and fall prey to posters who try to manipulate a company’s stock, typically by pushing up its price with misleading information, then selling the stock near its peak.”
Corporate executives and public relations departments routinely monitored the bulletin boards, keenly aware that one negative post could affect employee morale and, more importantly, stock prices. And they did not have faith in the marketplace of ideas sorting out the truth from the falsities. While companies were accustomed to handling negative press coverage, the pseudonymous criticism on Yahoo! Finance was an entirely different world. Executives knew to whom they could complain if a newspaper’s business columnist wrote about inflated share prices or pending layoffs. Yahoo! Finance’s commenters, on the other hand, typically were not easily identifiable. They could be disgruntled employees, shareholders, or even executives.
The reputation-obsessed companies and executives could not use the legal system to force Yahoo! to remove posts that they believed were defamatory or contained confidential information. In February 1996, Congress passed Section 230 of the Communications Decency Act, which generally prevents interactive computer services—such as Yahoo!—from being “treated as the publisher or speaker” of user content. In November 1997, a federal appellate court construed this immunity broadly, and other courts soon followed. Congress passed Section 230 in part to encourage online platforms to moderate objectionable content, and the statute creates a nearly absolute bar to lawsuits for defamation and other claims arising from third-party content, whether or not they moderate. Section 230 has a few exceptions, including for intellectual property law and federal criminal law enforcement. Section 230 meant that an angry subject of a Yahoo! Finance post could not successfully sue Yahoo! for defamation, but could sue the poster. That person, however, often was difficult to identify by screen name.
Not surprisingly, the Yahoo! Finance bulletin boards would become the first major online battleground for the right to anonymous speech. Companies’ attempts in the late 1990s to unmask Yahoo! Finance posters would set the stage for decades of First Amendment battles over online anonymity.
A November 1, 1998, reply in the Raytheon bonuses thread came from a user named RSCDeepThroat. The four-paragraph post speculated on the size of bonuses. “Yes, there will be bonuses and possibly for only one year,” RSCDeepThroat wrote. “If they were really bonuses, the goals for each segment would have been posted and we would have seen our progress against them. They weren’t, and what we get is black magic. Even the segment execs aren’t sure what their numbers are.” RSCDeepThroat predicted bonuses would be less than 5 percent. “That’s good as many sites are having rate problems largely due to the planned holdback of 5%. When it becomes 2%, morale will take a hit, but customers on cost-plus jobs will get money back and we will get bigger profits on fixed-price jobs.”
RSCDeepThroat posted again, on January 25, 1999, in a thread with the title “98 Earnings Concern.” The poster speculated about business difficulties at Raytheon’s Sensors and Electronics Systems unit. “Word running around here is that SES took a bath on some programs that was not discovered until late in the year,” RSCDeepThroat posted. “I don’t know if the magnitude of those problems will hurt the overall Raytheon bottom line. The late news cost at least one person under Christine his job. Maybe that is the apparent change in the third level.” The poster speculated that Chief Executive Dan Burnham “is dedicated to making Raytheon into a lean, nimble, quick competitor.” Although RSCDeepThroat did not provide his or her real name, the posts’ discussion of specifics—such as the termination of someone who worked for “Christine”—suggested that RSCDeepThroat worked for Raytheon or was receiving information from a Raytheon employee.
RSCDeepThroat and the many other people who posted about their employers on Yahoo! Finance had good reason to take advantage of the pseudonymity that the site provided. Perhaps the most important driver was the Economic Motivation; if their real names were linked to their posts, they likely would lose their jobs. Likewise, the Legal Motivation drove their need to protect their identities, as many employers had policies against disclosing confidential information, and some companies require their employees to sign confidentiality agreements. And the Power Motivation also was a likely factor in the behavior of some Yahoo! Finance posters—suddenly, the words and feelings of everyday employees mattered to the company’s top executives.
Raytheon sought to use its legal might to silence anonymous posters. The prospect of inside information being blasted across the Internet apparently rankled Raytheon’s executives so much that the company sued RSCDeepThroat and twenty other Yahoo! Finance posters for breach of contract, breach of employee policy, and trade secret misappropriation in state court in Boston. In the complaint, the company wrote that all Raytheon employees are bound by an agreement that prohibits unauthorized disclosure of the company’s proprietary information. Raytheon claimed that RSCDeepThroat’s November post constituted “disclosure of projected profits,” and the January post was “disclosure of inside financial issues.”
Raytheon’s complaint stated only that the company sought damages in excess of twenty-fi ve thousand dollars. Litigating this case might cost more than any money the company would recover in settlements or jury verdicts. The lawsuit would, however, allow Raytheon to attempt to gather information to identify the authors of the critical posts.
Raytheon’s February 1, 1999, complaint was among the earliest of what would become known as a “cybersmear lawsuit,” in which a company filed a complaint against (usually pseudonymous) online critics. Because of its high visibility and large number of pseudonymous critics, Yahoo! Finance was ground zero for cybersmear lawsuits.
Because Raytheon only had the posters’ screen names, the defendants listed on the complaint included RSCDeepThroat, WinstonCar, DitchRaytheon, RayInsider, RaytheonVeteran, and other monikers that provided no information about the posters’ identities. To appreciate the barriers that the plaintiffs faced, it first is necessary to understand the taxonomy that applies to the levels of online identity protection. This was best explained in a 1995 article by A. Michael Froomkin. He summarized four levels of protection:
Traceable anonymity: “A remailer that gives the recipient no clues as to the sender’s identity but leaves this information in the hands of a single intermediary.”
Untraceable anonymity: “Communication for which the author is simply not identifiable at all.”
Untraceable pseudonymity: The message is signed with a pseudonym that cannot be traced to the original author. The author might use a digital signature “which will uniquely and unforgeably distinguish an authentic signed message from any counterfeit.”
Traceable pseudonymity: “Communication with a nom de plume attached which can be traced back to the author (by someone), although not necessarily by the recipient.” Froomkin wrote that under this category, a speaker’s identity is more easily identifiable, but it more easily allows communication between the speaker and other people.
Although traceable anonymity and traceable pseudonymity are not substantially diff erent from a technical standpoint—in both cases, the speakers can be identified, Margot Kaminski argues that a speaker’s choice to communicate pseudonymously rather than anonymously might have an impact on their expression because pseudonymous communication “allows for the adoption of a developing, ongoing identity that can itself develop an image and reputation.”
Yahoo! Finance largely fell into the category of traceable pseudonymity. Yahoo! did not require users to provide their real names before posting. But it did require them to use a screen name and asked for an email address (though there often was no guarantee that the email address alone would reveal their identifying information). It automatically logged their Internet Protocol (IP) addresses, unique numbers associated with a particular Internet connection. Plaintiff’s could use the legal system to obtain this information, which could lead to their identities, albeit with no guarantee of success.
A former DeepMind employee has accused the company of mishandling a series of serious sexual harassment allegations. In a report published Wednesday, TheFinancial Timesrecounts the experience of a former female staff member who alleges she was sexually assaulted twice by a senior researcher at the Google subsidiary. She says her harasser also sent her multiple traumatic documents, including one where he made allusions to raping unconscious women.
DeepMind eventually dismissed the researcher, but not before it subjected his victim to a disciplinary process she argues showed major flaws in how the company handles such incidents. All told, it reportedly took DeepMind seven months to address the complaint, and only did so after the former employee filed an appeal. It then allegedly took another two months before the company finally dismissed her harasser in September 2020.
During that period, the former employee was told she would face “disciplinary” action if she talked about her complaint with colleagues. She was advised not to visit the office where her harasser worked, but her manager, not knowing the full scope of the complaint, repeatedly pushed her to attend meetings at that same building. According to The Times, DeepMind did not place any restrictions on the alleged perpetrator, a claim the company disputes.
A spokesperson for DeepMind said the firm told the researcher not to contact the staff member in September 2019. The company also disputes a claim the researcher received an award for their work during the time they were being investigated by the company. DeepMind says the award was one meant for the team the alleged perpetrator worked for and was related to a historic research paper.
“According to your own findings, I was subjected to sexual harassment, assault and abuse… I will never be the same person. I have spent almost the entire last year fearing for my safety. There is absolutely… no reason why the investigation was so dysfunctional,” the former employee said in an August 2020 email to DeepMind’s senior leadership.
“Any incident of sexual assault or harassment is abhorrent. DeepMind takes all allegations of workplace misconduct extremely seriously and we place our employees’ safety at the core of any actions we take,” DeepMind told Engadget. “The allegations were investigated thoroughly, and the individual who was investigated for misconduct was dismissed without any severance payments.”
Following the incident, DeepMind told Engadgetit implemented a series of policies to change how it investigates such matters. Among other changes, the company says it now communicates more clearly how employees should go about raising concerns, and that it has a better system in place to support workers who complain of harassment and discrimination. It also told The Times it “regrets” the former staff member was provided with “incorrect guidance around breaking confidentiality.”
A Dutch foundation has hit Apple with a lawsuit over the App Store’s developer fees, seeking €5.5 billion euro in damages for what it alleges is monopolistic behavior. In a press release, the Dutch Consumer Competition Claims Foundation stated it was filing a "collective claim" for damages, on behalf of any iPhone or iPad owners in the EU who have downloaded a paid app or made purchases within an app.
Suing Apple for its app store policies on behalf of consumers— instead of developers — might seem like an unusual move on the Dutch foundation’s part. Most of the scrutiny over the tech giant’s so-called “Apple tax” has focused on its deleterious impact on the profits of developers. Just this past January, Apple agreed to settle a class-action settlement by US developers for $100 million.
The Consumer Competition Claims Foundation alleges that Apple’s developer fees were passed on to consumers, in the form of higher prices. “App developers are forced to pass on to consumers the increased costs caused by Apple’s monopolistic practices and unfair terms,” wrote the foundation in its press release.
The foundation is asking EU consumers who purchased an app in Apple’s App Store or made an in-app purchase since September 2009 to join its complaint. The lawsuit is set to be filed in the Amsterdam District Court.
This isn’t the first time Apple is taking heat from Dutch authorities. Apple has yet to comply with a January order from Dutch regulators that requires the company to offer third-party payment options for dating app customers. The Netherlands Authority for Consumers and Markets (ACM) is fining Apple €5 million for every week it doesn’t follow through with the order. Dutch regulators have already fined Apple more than €50 million and counting.
But according to TechCrunch, there’s a sign of a potential compromise. Apple is working on an amended proposal of its dating app policy, which will be reviewed by ACM. But even if the two parties reach a consensus, Apple will soon have much larger battles to fight in the EU. The EU is working on finalizing the Digital Markets Act, which will (among a number of other anti-competitive measures) require companies like Apple and Google to allow alternatives for in-app payments.
A judge has ordered Activision Blizzard to pay $18 million to settle a federal lawsuit accusing the company of fostering a sexist, discriminatory workplace. The US Equal Employment Opportunity Commission filed the suit in September and that same afternoon, Activision Blizzard agreed to set up an $18 million fund for employees who experienced sexual harassment and gender-based discrimination at the studio. Today's ruling approves this plan.
The fund will be distributed among people who worked at Activision Blizzard from September 1st, 2016, to today. Eligible employees and former employees have to opt-in to receive a payout, and they can submit claims relating to sexual harassment, pregnancy discrimination and retaliation.
Today's ruling isn't the end of the legal issues for Activision Blizzard, and it may even complicate efforts still underway by other agencies. California's Department of Fair Employment and Housing first sued the studio in July 2021 following a two-year investigation into allegations that sexism, gender-based harassment and a "frat boy culture" pervaded the Activision Blizzard offices. That state-level lawsuit is still in progress, while the $18 million ruling today applies only to the federal case filed by the EEOC.
Anyone who signs on as a claimant in the EEOC suit will not be eligible to participate in the state's case, at least when it comes to harassment, retaliation or pregnancy discrimination. If they have additional claims, such as pay inequities, they can bring those to the DFEH lawsuit.
The DFEH and EEOC have been battling for dominance with their lawsuits against Activision Blizzard. Lawyers for the California agency have expressed concern that a federal settlement might prevent them from pursuing additional damages at a state level. The DFEH case is scheduled to go to trial in February 2023.
"The DFEH will continue to vigorously prosecute its action against Activision in California state court,” spokesperson Fahizah Alim said last week.
Additionally, the DFEH, activists and Activision Blizzard employees have argued the $18 million figure is far too low to properly compensate all potential claimants, which could add up to hundreds of people. Communications Workers of America, the labor union backing Activision Blizzard employees during this time, called the sum "woefully inadequate" in a letter to the EEOC in October.
"This would provide the maximum settlement for only 60 workers," the CWA letter reads. "If any significant number of workers received the maximum under federal law, there would be little available for many other workers adversely affected. We are concerned about how the EEOC got to that number and how it believes that number will be fairly distributed. Please explain."
California's DFEH fought against a similar ruling in the case of Riot Games. Following a 2018 class-action lawsuit claiming rampant sexual harassment and discrimination at the studio, Riot was originally ordered to pay $10 million to claimants. The DFEH blocked that payout, arguing it was much too small, and the amount was eventually increased to $100 million.
A spokesperson for the EEOC provided the following statement to Engadget following today's federal ruling: "We are pleased that the judge has indicated her intent to sign the consent decree. The consent decree not only provides monetary relief to potential claimants that were impacted by sexual harassment, pregnancy discrimination and related retaliation at Activision Blizzard throughout the United States, but also puts in place significant injunctive relief at Activision Blizzard to prevent and address discrimination, harassment, and retaliation."
In an essay published Friday on the whistleblower platform Lioness, former Microsoft manager Yasser Elabd alleged that Microsoft fired him after he alerted leadership to a workplace where employees, subcontractors and government operators regularly engaged in bribery. He further alleges that attempts to escalate his concerns resulted in retaliation within Microsoft by managers, and eventual termination from his role.
Elabd claims in his essay that he worked for Microsoft between 1998 and 2018, and had oversight into a "business investment fund " — essentially a slush fund to "cement longer-term deals" in the Mid-East and Africa. But he grew suspicious of unusual payments to seemingly unqualified partners. After examining several independent audits, he discovered what he believes is a common practice: After setting up a large sale to entities in the region, a "discount" would be baked in, only for the difference between the full-freight cost and discounted fee to be skimmed off and divided between the deal-makers.
“This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity—often a government official,” Elabd alleged.
The former Microsoft manager gave several examples of suspicious transactions and red flags he witnessed over his two decades working for the company abroad. In one audit, Microsoft gave the Saudi Ministry of the Interior a $13.6 million discount which never reached the agency’s doors. In 2015, a Nigerian official complained that the government paid $5.5 million for licenses "for hardware they did not possess."
In another example, Qatar’s Ministry of Education paid $9.5 million, over a period of seven years, for Microsoft Office and Windows licenses that went unused. Auditors later discovered that employees at that agency didn’t even have access to computers.
“We are committed to doing business in a responsible way and always encourage anyone to report anything they see that may violate the law, our policies, or our ethical standards,” Becky Lenaburg, a VP at Microsoft and deputy general counsel for compliance and ethics, wrote in a statement to The Verge. “We believe we’ve previously investigated these allegations, which are many years old, and addressed them. We cooperated with government agencies to resolve any concerns.”
Elabd claims his attempts to alert managers resulted in his being shouted at by one manager, iced out of certain deals and told by an executive that he had effectively set himself up to be let go after attempting to involve CEO Satya Nadella. After being terminated, Elabd wrote that he brought his documentation before the Securities and Exchange Commission and Department of Justice. He claims the DoJ refused to take up his case. According to Protocol, the SEC dropped the case earlier this month due to a lack of resources.
“As I alleged in my complaint to the SEC, Microsoft is violating the Foreign Corrupt Practices Act, and continues to do so brazenly. And why wouldn’t they?" wrote Elabd. "By declining to investigate these allegations and the evidence I’ve given them, the SEC and DOJ have given Microsoft the green light.”
Two former TikTok moderators filed a federal lawsuit seeking class-action status today against the platform and parent company Bytedance, reportedNPR. The plaintiffs, Ashley Velez and Reece Young, worked for the social video platform last year as contractors. To fulfill their role as moderators, they witnessed “many acts of extreme and graphic violence”, including murder, bestiality, necrophilia and other disturbing images. The lawsuit accuses TikTok of negligence and violating labor laws in California, the state where the platform's US operations is based.
Both plaintiffs said they were tasked with viewing hours of disturbing footage, often working 12-hour days. They both paid for counseling out-of-pocket in order to deal with the psychological toll of the job. The lawsuit accuses TikTok of imposing high “productivity standards” on moderators, which forced them to watch large volumes of disturbing content without a break. Both employees were also forced to sign non-disclosure agreements as a condition of their employment.
"We would see death and graphic, graphic pornography. I would see nude underage children every day," Velez told NPR. "I would see people get shot in the face, and another video of a kid getting beaten made me cry for two hours straight."
Moderators at Facebook and other platforms have spoken out in the past about the severe psychological toll of their jobs. Employees have alleged they're given a short period of time, usually only seconds, to determine whether a video violates the platform’s policies. The job has often been called “the worst job in technology," and workers regularly suffer from depression, PTSD-like symptoms and suicidal ideation. In a 2020 settlement,Facebook paid over $52 million to a group of former moderators who said they developed PTSD from the job.
This is not the first lawsuit of this type for TikTok, which currently has a base of 10,000 content moderators worldwide. Last December another content moderator for TikTok also sued the platform for negligence and violating workplace safety standards. According to NPR, the lawsuit was dropped last month after the plaintiff was fired.
John Roach — the former chief of RadioShack parent company Tandy who later became one of the lead proponents of the personal computer — has died at 83, reportedThe New York Times. The Fort Worth native died in the city where he was raised, and no cause of death was given by his wife. As an employee of Tandy in the 70s, Roach convinced RadioShack executives to sell the TRS-80, a desktop microcomputer that retailed for just under $600, in its stores nationwide. This was at a time when few complete, pre-assembled computers were on the market. The TRS-80 first hit RadioShack stores in 1977, and by 1981 became the largest-selling computer of all time, beating out Apple’s early offerings.
"It is obvious that the microcomputer is at the center of a communications and information revolution. I believe that within 20 years most Americans will be computer users and will benefit from the attendant mental advantage,” Roach toldCreative Computing in 1984.
Roach was born on November 22, 1938 in Stamford, Texas. He started his career at Tandy Corporation as a data processing manager in 1967. Once a top-seller of CB radios through its RadioShack stores, the Tandy Corporation was then in a sales slump due to a decline in demand. The TRS-80, which sold exclusively at RadioShack stores, helped revive the company. By the time Roach became chief operating officer of Tandy in 1980, the company had close to 40 percent of the personal computer market.
The very first TRS-80 came equipped with a Zilog 80 processor, 4 KB DRAM, 64-character per line video monitor and Level I BASIC language interpreter. Its keyboard could only type uppercase letters. But the units sold like wildfire, and became a favorite among computer hobbyists and business professionals. By the early ‘90s, the TRS-80’s market share took a nosedive, overtaken by offerings from Apple and IBM. Roach retired as chief executive of Tandy in 1998.
“I was saddened to hear of John’s passing. John’s vision and his ability to get early computers, like the TRS-80, into people’s hands through RadioShack made him one of the true pioneers of this industry,” Bill Gates said in a statement to the Fort Worth Star-Telegram. “He helped create a market that so many people and companies benefited from as the personal computing industry took shape.”
Activision has been served another lawsuit over harassment at the company. As Bloomberg Law and Game Developer report, an anonymous woman still working at Activision Blizzard has sued the game developer in a Los Angeles court for allegedly enabling sexual harassment and discrimination. The company also retaliated against her when she shared her experiences at a December 2021 press conference, according to the complaint.
As with past suits, the woman accused Activision Blizzard of routinely allowing misconduct. The senior administrative assistant in IT was reportedly pressured to join in "cube crawls" where women were harassed and groped, and was told to tolerate unwanted sexual advances and excessive drinking. She was also asked to keep her complaints private, according to the suit, and supposedly faced an increasingly hostile workplace the more she spoke out.
The plaintiff said she applied for positions elsewhere in the company to avoid sexism in IT, and wrote to president Allen Brack (who stepped down in August 2021 as the scandal grew) about the problems. She was offered and took a lower-paying role elsewhere in the company, but noted that her application for an executive assistant job was rejected in December that year, shortly after she'd applied in November.
In the lawsuit, the woman demands damages that include lost earnings and medical expenses. She also asks for functional reforms, including the ouster of CEO Bobby Kotick, a rotating human resources team (to prevent conflicts of interest) and the use of a neutral firm to investigate incidents.
We've asked Activision Blizzard for comment. The company has used some measures to address harassment and discrimination complaints, including removing employees, taking disciplinary actions and forming a committee to implement anti-harassment initiatives. It also settled an Equal Employment Opportunity Commission lawsuit and has been more cooperative with investigations. However, it's still facing a mounting number of legal challenges that include both more lawsuits and an SEC investigation — the debacle is far from over.
Washington DC Attorney General Karl Racine has filed a lawsuit against Grubhub over alleged hidden fees and other "deceptive trade practices." His office has accused Grubhub of violating the jurisdiction's Consumer Protection Procedures Act in eight separate ways.
"We're suing Grubhub for misleading District residents and taking advantage of local restaurants to boost its own profits," Racine wrote on Twitter. "Grubhub charges hidden fees and uses bait-and-switch tactics, all while pretending to help local businesses during the pandemic. This needs to stop."
Racine's office also claims the app charged users higher prices than they'd pay in restaurants and that it misrepresented an offer of "unlimited free delivery" with a Grubhub+ subscription, since customers still need to pay a service fee.
The suit alleges that Grubhub offered deliveries from more than 1,000 eateries in the area without restaurants' permission. It accused the company of listing phone numbers for restaurants that were actually routed to Grubhub workers and creating websites for restaurants without their consent or clearly disclosing that it operated the sites. Grubhub has ended those practices, as TechCrunch notes.
"In one of Grubhub’s most shameless moves, at the beginning of the pandemic, it ran a discount called 'Supper for Support,' ginning up business by claiming to help struggling restaurants, and then stuck restaurants with the bill," Racine said. "This program cut into struggling restaurants’ profit margins while padding Grubhub’s bottom line."
The promotion allowed restaurants to offer a $10 discount on orders over $30, but they had to cover the cost. Grubhub later offered them a $250 credit, as the suit notes.
"We are disappointed [the AG’s office has] 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," Grubhub said in a statement. "We will aggressively defend our business in court and look forward to continuing to serve DC restaurants and diners.”
Grubhub says it has worked with Racine and his office over the last year to address concerns. In the wake of the lawsuit, the service is adding disclaimers about service fees for Grubhub+ subscribers and the fact prices may be lower at restaurants than in its app. Grubhub will also make it clearer that users can place orders for free through its app and website as long as they pick up food themselves. These changes will apply to everyone, not only users in DC.
The DC lawsuit is the latest in a number of legal battles over delivery apps' business practices. Chicago has also sued Grubhub (and DoorDash) over alleged deceptive delivery fees and charging higher prices for menu items than restaurants themselves do. In September, those two services and Uber Eats filed suit against New York City for placing limits on the fees they can charge restaurants.
