NYC Council expands probe of third-party delivery sector

The New York City Council increased its pressure on Grubhub with an October letter demanding the company hire a third-party evaluator to review and refund all erroneous fees collected from restaurants for phone orders. This week, Grubhub responded and the Council was not impressed.

A representative from the Council also noted that their inquiry into third-party delivery goes beyond inaccurate phone charges and includes the entire sector.

In a letter sent to the Council on Wednesday, Grubhub outlined a cross-functional task force to review the phone order process. "The task force will specifically look at how we can better communicate with our restaurant partners and make our system easier to use," the letter states. "Task force leaders will report back with their recommendations in the next 60 days, which we will share with you."

Notably, the task force is to be made up of "leads from across the company," according to a spokesperson for Grubhub. Not the third-party evaluator the Council requested. 

"While the announcement is welcomed news, it clearly just falls way short of what the chair and committee are looking for," said Reginald Johnson, NYC Councilman Mark Gjonaj's chief of staff. Gjonaj chairs the small business committee and organized the hearing to understand the impact of food delivery apps on the restaurant industry and the subsequent oversight inquiry.

Related:Restaurants are pushing back. Delivery players are listening

Previously, Grubhub was the target of a class-action lawsuit filed by a restaurant operator who claimed the delivery service charged restaurants for calls made through the app, even when they didn't result in orders. One issue that arose during the council hearing is that restaurants could not view charges made more than 60 days prior, to identify if false charges had been made. 

In response, Grubhub in August extended the "look-back" period for restaurants to review all phone orders to 120 days back. The company also noted the extension in its letter to the Council. 

"Restaurants are allowed to request that Grubhub audit phone order commissions going back 120 days, and are refunded on any charges made in error," the letter from Grubhub states. "It is worth noting that we currently do not hold onto customer phone orders well beyond that point for a number of reasons, including due to consumer privacy and data security considerations."

The Council continues to insist on expanding the phone probe beyond 120 days. 

"Expanding the 'look back' period from 60 to 120 days and forming a task force are all positive signs, but these are baby steps. The chair and Committee remain firm that all erroneous phone order charges must be refunded—whether they happened 20 or 200 days ago," Johnson said.

Related:In NYC delivery hearing, Grubhub execs get grilled

Johnson stressed that the Committee's inquiry was not specific to Grubhub. "The Committee is taking a 360-degree inquiry on this sector overall," he said.

But the Committee will not be tied to Grubhub's 60-day task-force timeline, and Johnson expects that the Council will have findings to share before three-months time. "We have turned a corner from the fact-finding stage to looking for ways we can improve some of the issues we have uncovered." 

Contact Gloria Dawson at [email protected]

Follow her on Twitter: @GloriaDawson