The business practices and fee structure of Grubhub Inc. (NYSE: GRUB) has long been under scrutiny, but now the company is accused of abusing businesses in a whole new way. A recent investigation has found that Grubhub may be cybersquatting on internet domains in the names of real restaurants in order to increase the amount of commissions it earns. Cybersquatting is the practice of registering domains that resemble or include the names of trademarked businesses with the intent of profiting off them.
According to a report published in The New Food Economy, Grubhub owns some 23,000 internet domains, many of them incorporating the names of restaurants around the country. At least some of the sites Grubhub operated featured the names and logos of restaurants that were not its partners. When contacted, some of the owners of those restaurants said that the websites were set up without their express permission.
Grubhub typically charges commissions to restaurants for orders it sends their way. The amount of money the company makes on an order is higher when that order comes through the phone numbers and websites Grubhub controls than when it comes through those controlled by the restaurant itself. Company executives estimated that GrubHub made about $30 million in phone commissions last year.
The recent investigation found that the websites set up by Grubhub included links that point to Grubhub, rather than to the restaurants own sites. The phone numbers listed on the website were not the ones for the restaurant, but were ones that that delivery company controlled. In some cases, the created by GrubHub were competing directly with the restaurants’ real websites.
Grubhub spokesman Brendan Lewis denied in a statement that the company was cybersquatting. He said that Grubhub registered the domains as a service to its customers and that that the site registrations were consistent with the company’s contracts with its partners. He declined to comment on the sites that were made with the names of restaurants that were not Grubhub partners.
Lewis did say that the company had ceased the practice, but did not say when it stopped. According the reports, the last site created owned by Grubhub was created in May of this year.