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DOORDASH, INC.

(DASH)
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DoorDash : Chicago sues Grubhub, DoorDash for ‘deceptive, unfair' business practices

08/27/2021 | 05:30pm EDT

The city of Chicago has filed landmark lawsuits against third-party delivery services for "deceptive and unfair" business practices, as outlined in a city press release issued Friday.

These lawsuits are the result of a collaborative investigation led by Business Affairs and Consumer Protection (BACP) and the city's law department. They are the first comprehensive law enforcement actions against meal delivery companies in the United States, according to the release.

The lawsuits claim the companies violated the Chicago Municipal Code for engaging in deceptive and unfair business practices that harm restaurants and mislead consumers. and seek injunctive relief in the form of greater transparency and other key conduct modifications, restitution for restaurants and consumers hurt by the predatory tactics, and civil penalties.

The legal action alleges that DoorDash and Grubhub's misconduct has been ongoing for years and continues to this day, according to the release. The allegations against DoorDash and Grubhub claim the following:

  • Advertise order and delivery services from unaffiliated restaurants without their consent, leaving restaurants to repair reputational damage and resolve consumer complaints caused by Defendants.
  • Lure consumers into a bait-and-switch with deceptively small delivery fees upfront, only to charge misleading fees at the end of the transaction. This increases the total cost of delivery by as much as six times the amount initially advertised.
  • Hide that menu prices on their platforms are often significantly higher than the prices available if ordering directly from the restaurant.

Other misconduct is specific to each company, according to the release. Grubhub's alleged exploitative tactics have included:

  • Publishing deceptive "routing" telephone numbers that Grubhub represented as the restaurant's direct number, and regularly charging commissions even when calls to these numbers did not result in an order.
  • Creating and maintaining "impostor Web sites" for restaurants, which look like the restaurant's actual website but route unsuspecting consumers to Grubhub.
  • Launching deceptive, promotional campaigns to "save restaurants" during the pandemic, while forcing participating restaurants to extend their contracts, cover the cost of the promotions, and pay Grubhub its full commission on all orders.
  • Violating the City's emergency cap of 15% on restaurant commissions.

DoorDash's alleged misconduct has included:

  • Misleading consumers to believe they were tipping drivers directly, when in fact the customer "tip" was used to subsidize DoorDash's own payment to its drivers.
  • Imposing a misleading "Chicago Fee" of $1.50 on every order in the City, deceptively implying the fee was required by, or paid to, Chicago — when in fact DoorDash was the sole beneficiary.

"We discovered that Grubhub and DoorDash have been engaging in deceptive and misleading business practices that harm consumers and exploit restaurants. These practices continued unabated during the pandemic when restaurants were struggling to survive," Acting BACP Commissioner Kenneth Meyer said in the release. "We heard from the hospitality industry and Chicago's consumers about these unfair practices and this action demonstrates we will hold non-complying businesses accountable."

DoorDash spokesperson Taylor Bennett told KCTV the suit was "baseless."

"DoorDash has stood with the City of Chicago throughout the pandemic, waiving fees for restaurants, providing $500,000 in direct grants, creating strong earning opportunities, and delivering food and other necessities to communities in need," Bennett said. "This lawsuit will cost taxpayers and deliver nothing."

Grant Klinzman, a spokesman for GrubHub, told the news channel that the company was disappointed by the suit.

"Every single allegation is categorically wrong and we will aggressively defend our business practices," he said. "We look forward to responding in court and are confident we will prevail."

Copyright © 2021 Networld Media. All rights reserved., source Industry News

Stocks mentioned in the article
ChangeLast1st jan.
DOORDASH, INC. 1.46% 218.82 Delayed Quote.53.29%
GRUBHUB INC. -1.90% 59.89 End-of-day quote.-19.36%
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Financials (USD)
Sales 2021 4 699 M - -
Net income 2021 -374 M - -
Net cash 2021 3 740 M - -
P/E ratio 2021 -190x
Yield 2021 -
Capitalization 73 947 M 73 947 M -
EV / Sales 2021 14,9x
EV / Sales 2022 12,3x
Nbr of Employees 3 886
Free-Float 90,5%
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Christopher D. Payne President & Chief Operating Officer
Prabir Adarkar Chief Financial Officer
Louis John Doerr Independent Non-Executive Director
Alfred Lin Independent Non-Executive Director
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