Law360 (May 11, 2020, 10:20 PM EDT) -- Grubhub Inc. has been running a false advertising campaign telling customers that restaurants it doesn't partner with are closed during the coronavirus pandemic in order to redirect those customers to its partner restaurants, according to a lawsuit filed Monday in Colorado federal court.
The food delivery app has been knowingly lying to customers to steer them to its partner restaurants by telling them that nonpartner competitors are either closed or not accepting online orders, even when they are, Denver bar and restaurant Freshcraft said in its proposed class action.
Denver bar Freshcraft alleges Grubhub falsely tells customers that nonpartner restaurants aren't delivering in a bid to direct their business to partner restaurants.
The family-owned restaurant filed suit on behalf of all restaurants in the U.S., claiming that Grubhub created landing pages for falsely advertising restaurants as being closed or not accepting online orders when they are actually accepting orders. The suit is seeking to bar Grubhub from continuing its alleged false advertising and to pay damages to the restaurants it has purportedly lied about.
Since the COVID-19 outbreak led to most states issuing stay-at-home orders, meal delivery services like Grubhub have seen business skyrocket, according to the suit. And Grubhub has created menu pages for most restaurants in major cities, including the ones that do not offer delivery through its platform, Freshcraft said.
When "Freshcraft delivery" is entered into Google, Grubhub's page comes up, before the restaurant's own site, even though Freshcraft does not deliver through Grubhub, according to the complaint. But the Grubhub page informs customers that Freshcraft is not taking online orders, the suit said. Customers are then directed to look at Grubhub partner restaurants, Freshcraft said.
"This online advertisement falsely claims that Freshcraft is closed when it is not," Freshcraft said. "In reality, Freshcraft is not only open, but also delivering its food to its customers using a different delivery platform. Freshcraft does not work with Grubhub and does not plan on contracting with their delivery or online ordering services."
The suit includes claims of false advertising under the Lanham Act.
"Nobody from Grubhub reached out to us to see if we were open or delivering before telling the world that we were closed and pointing my potential customers to restaurants that were paying Grubhub," Erik Riggs, the owner of Freshcraft, told Law360 in a statement Monday. "We are doing what we can to stay afloat and Grubhub is just feeding off people's troubles."
Freshcraft attorney Ross Ziev said Grubhub isn't competing on a level playing field.
"Falsely telling consumers that a restaurant is not open or taking orders is not only deceptive, but for many of these restaurants it could mean the end to their businesses," Ziev said.
A representative for Grubhub did not immediately respond to a request for comment.
Last month, Grubhub, DoorDash Inc., Postmates Inc. and Uber Technologies Inc.'s Eats platform were hit with a proposed class action in New York federal court alleging diners across the U.S. are being hurt by the monopolistic behavior of the companies behind the nation's top food delivery apps.
The suit claims the platforms impose "no price competition" clauses on restaurants, forcing them to offer food items for the same price to both delivery and dine-in customers.
Freshcraft is represented by Ross Ziev of the Law Offices of Ross Ziev PC and Laura L. Sheets of Liddle & Dubin PC.
Counsel information for Grubhub was not immediately available.
The case is CO Craft LLC dba Freshcraft v. Grubhub Inc., case number 1:20-cv-01327, in the U.S. District Court for the District of Colorado.
--Additional reporting by Mike LaSusa. Editing by Breda Lund.
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