It’s all kicking off in Chicago – and we’re not talking about the Bears. After butting heads with third-party delivery apps for a long time, the city of Chicago has had enough and is fighting back.
Third Party Food Delivery Lawsuit: Chicagoans have enough
Its widely known – and accepted, that restaurants have been wrestling with third-party delivery apps for a very long time. Before the pandemic, delivery services were a contentious issue. They were known to have caused nothing but hassle and a black hole for money. But when Covid-19 arrived on the scene, third parties swooped in with offers to help restaurants. In many cities and states, they agreed to commission caps, “voluntarily” cut their commissions and deferred the collection of fees. Sound too good to be true? It was.
While many applauded their seemingly genuine offers of help, in reality third party delivery companies saw coronavirus as an opportunity. While restaurants have somewhat “put up with” this expected bullish behaviour pre-Covid, after what they have been through this last 18 months, they have had enough. So much so, Chicago is suing both DoorDash and Grubhub.
Comprehensive action needed to help restaurants protect their brands and businesses
Both DoorDash and Grubhub were faced with a day of reckoning when the city announced a lawsuit against both parties through Mayor Lori Lightfoot’s office. The lawsuits included a list of shared allegations against both companies, along with specific allegations aimed at each individually. In general, the suit concerns the “deceptive and unfair business practices that harm restaurants and mislead consumers.” As Mayor Lori E. Lightfoot said in her statement “It is deeply concerning and unfortunate that these companies broke the law during these incredibly difficult times, using unfair and deceptive tactics to take advantage of restaurants and consumers who were struggling to stay afloat.”
The complaints allege that while restaurants were struggling to survive, both services leveraged soaring demand for delivery by:
- Engaging in a “bait-and-switch” on advertised fees
- Advertised delivery from unaffiliated restaurants without their consent
- Luring consumers with deceptively low delivery fees upfront that increased up to six-fold at the end of the transaction
- Pricing menu items up to 25% higher on Grubhub and up to 58% higher on DoorDash, and
- Violating the city’s 15% emergency cap on food delivery commissions.
In addition, the city alleges DoorDash used customer tips intended for delivery drivers to subsidize their pay and imposed a $1.50 “Chicago Fee” on every order within the city limits – in response to the November 2020 emergency cap on commissions it was allowed to collect. As one would expect, both parties denied any wrong doing. Grubhub rejected it violated the cap, as well as every other allegation in the lawsuit while DoorDash said “The lawsuit is without merit and a waste of taxpayer resources”. The best of all, representatives for the two companies called the lawsuits filed last Friday in Cook County Circuit Court “baseless.”
But Chicago didn’t file these suits on a whim. In fact, their lawsuits are the result of a collaborative investigation led by BACP and the City’s Law Department. Interestingly the defendants are the target of legal authorities in other cities and states. San Francisco’s district attorney accused delivery companies of violating California law by classifying drivers as contractors. In 2019, Washington, D.C., reached a settlement with DoorDash after alleging the company misled customers about how much drivers received in tips. Most recently, Massachusetts’ attorney general sued Grubhub in July, accusing it of violating a fee cap. And only last week New York City Council passed a bill to place a permanent cap on the commissions third parties can charge restaurants, along with the need to apply for operating licenses, which would be reviewed every two years.
However, of all the lawsuits filed by other municipalities, Chicago’s is said to be the first one its kind in America. Instead of honing in one a single issue, Chicago’s lawsuits are the first to combine a variety of issues in one filing. According to city officials, a “comprehensive lawsuit” is more efficient. If successful, the lawsuits seek to prohibit Grubhub and DoorDash from engaging in further deceptive practices, fines of up to $10,000 for each violation and restitution for restaurants and customers allegedly hurt by their actions.
Third Party Food Delivery Lawsuit: Restaurant Elation
Not surprisingly, on Friday afternoon, Chicago’s restaurants cheered the city’s filings. They were universally celebrated by restaurant owners who felt hoodwinked and gaslighted not just throughout the pandemic, but since the very beginning. “This is how restaurants have been feeling for longer than the last 18 months,” said Scott Weiner, co-owner of the Fifty/50 Restaurant Group. “It feels a little [vindicating] to read and to hear that finally, after a lengthy investigation, that we’re right. They’ve ruined us. We’ve been taken advantage of.” Phil Foss, owner of El Ideas added “it’s incredibly inspiring to feel like someone’s listening to restaurants…Mayor Lori Lightfoot’s office and the city are in the right to stand up to the bullying tactics of third-party delivery services…These predatory companies have cornered restaurants into accepting their exorbitant fees, or to not realistically have a chance to compete at all.”
As the saying goes – Greed knows no bounds. But in this case, it might just be their undoing.