DoorDash, America’s premier food delivery platform, has been sued by Canada’s competition authority for “allegedly advertising misleading prices and discounts.”
Newsweek reached out to DoorDash via email outside of regular hours for comment.
Why It Matters
This marks the second major lawsuit to face DoorDash this year, following a $17-million settlement over the misuse of driver tips in February. As well as potentially forcing the delivery firm to significantly alter its pricing practices, the latest action could force the company to pay a significantly higher penalty, as well as restitution to affected customers.
What To Know
On Monday, the Canadian Competition Bureau announced it would be taking legal action against the San Francisco-based company, as well as its Canadian subsidiary DoorDash Technologies Canada. The antitrust watchdog said that the company had consistently promoted its services at lower prices than customers were eventually forced to pay, in violation of the Canadian Competition Act, while also misrepresenting certain fees as taxes rather than discretionary charges.
The lawsuit stems from DoorDash allegedly advertising food and other items at prices far lower than those customers eventually paid, and engaging in what the bureau refers to as “drip pricing”: a sales tactic in which customers are shown an initial lower price, with additional fees added later in the purchasing process. These included delivery costs, as well as obligatory “regulatory response” and “expanded range” fees.
“A bureau investigation found that consumers were unable to purchase food and other items at the advertised price on DoorDash’s websites and mobile applications due to the addition of mandatory fees at checkout,” the announcement read, describing the practice as “deceptive,” as “consumers are not presented with an attainable price up front.”
The Bureau alleged that DoorDash has been engaged in this alleged conduct for “close to a decade,” and has acquired nearly $1 billion in customer fees from doing so.
In addition, the investigation found that the company had combined service fees and taxes into a single item on a user’s bill, which it said was “false or misleading as it requires an extra click for the consumer to actually see that the ‘fees and estimated taxes’ are two separate charges, only one of which is imposed by the government on the purchaser and not the other.”
In its application with the Canadian Competition Tribunal, the bureau requested that DoorDash and its subsidiary stop engaging in the practices, pay a monetary penalty “as the tribunal deems appropriate,” and to pay restitution to affected customers. The latter amount, it said, could reach “the total amounts paid to DoorDash for the products in respect of which the reviewable conduct was engaged in.”
What People Are Saying
Canada’s competition commissioner Matthew Boswell said: “Parliament has made it clear that businesses must not engage in drip pricing by advertising unattainable prices and then adding mandatory fees. The Competition Bureau has been fighting against this misleading practice for years.
“Our litigation against DoorDash is another example of our efforts to ensure consumers are not misled and can trust the prices they see online. We urge all businesses to review their pricing practices and make sure they comply with the law.”
DoorDash denied hiding fees from or misleading customers, saying it believes the lawsuit “is an overly punitive attempt to make an example of an industry leader in local commerce,” in a statement quoted by Reuters.
What Happens Next?
According to the application, DoorDash has 45 days to issue a response to the Competition Tribunal.
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