DoorDash Sued For Taking Advantage of Consumers During Pandemic, Food Delivery Services Under Fire In Multiple Cities

DoorDash Inc. DASH has been hit with a lawsuit in Chicago for defrauding customers into paying higher prices for delivery services. The case could give justification for other cities to do the same.

What Happened: In the pandemic, food delivery services became one of the most convenient methods for consumers to get their meals. However, this also meant that the costs associated with delivery apps like DoorDash and UberEats, which is owned by Uber Technologies Inc. UBER, skyrocketed. 

Major cities have investigated the causes of the price increases, and the City of Chicago filed lawsuits against Grubhub and DoorDash. 

Chicago claims that DoorDash has been imposing a $1.50 "Chicago Fee" on consumers. The City argues that the consumers have been led to believe that the City set the extra charge, but the entire sum actually goes to DoorDash. They also claim that DoorDash has been using driver tips to subsidize operational costs.

The City is seeking injunctive relief, compensation for consumers, and changes to DoorDash policy regarding extra fees and the use of tips.

What's Next: The suit has been filed, and DoorDash will now have to respond to the allegations. DoorDash has already released a statement claiming that the case is "a waste of taxpayer resources." DoorDash also reminds the City of all they have done for Chicago via fee waivers for restaurants, $500,000 in grants, and job creation during the pandemic. 

Why It's Important: There have been many conversations on limiting food delivery companies' prices across the country.

For example, in New York City, a class-action lawsuit has been filed against GrubHub by a local bakery for exceeding a 20% cap on delivery fees. Additionally, Massachusetts also sued GrubHub for charging excessive delivery fees during the height of the pandemic. 

Additionally, just last week, New York City proposed a bill prohibiting apps like Doordash from charging more than 15% per delivery and more than 5% for other fees.

If the court finds that DoorDash has indeed been fraudulently up charging consumers, it will be further justification for more major cities across the country to impose more caps on what prices the company can charge. 

In 2020, DoorDash increased its revenue from $850 million to $2.9 billion and decreased its losses from $667 million to $461 million. However, if major cities limit what the company can charge, DoorDash will likely not increase revenue or recover losses at rates similar to 2020.