August 27, 2021
The city of Chicago is suing Door Dash and Grubhub, alleging the food delivery services engaged in deceptive business practices during the pandemic, misleading consumers and harming restaurants.
The lawsuits, filed separately Friday in Cook County Circuit Court, allege that as restaurants struggled and closed for indoor dining, DoorDash and Grubhub leveraged soaring demand for delivery by engaging in a “bait-and-switch” on advertised fees, marking up menu items and violating the city’s 15% emergency cap on food delivery commissions.
In addition, the city alleges Door Dash 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 we stared down a global pandemic that shuttered businesses and drove people indoors, the defendants’ meal delivery service apps became a primacy way for – people to feed themselves and their families, as well as support local restaurants,” Mayor Lori Lightfoot said in a news release. “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 both services advertised delivery from unaffiliated restaurants without their consent, lured consumers with deceptively low delivery fees upfront that increased up to sixfold at the end of the transaction, and priced menu items up to 25% higher on Grubhub and up to 58% higher on Door Dash.
Last year, approximately half of Chicago’s 7,500 restaurants closed either temporarily or permanently during the pandemic, the city said. But food delivery services thrived as customers under statewide stay-at-home orders ordered in. The city alleges Door Dash and Grubhub ramped up their “predatory tactics” during the pandemic.
Chicago-based Grubhub, a food delivery pioneer when it launched in 2004, was acquired in June by Amsterdam-based Just Eat Takeaway in a $7.3 billion all-stock transaction. The lawsuit alleges Grubhub “exploited restaurants and the goodwill of consumers” during the pandemic through promotional campaigns such as “Supper for Support,” which billed itself as a bid to save local restaurants but forced restaurants to foot the bill for a $10 off coupon.
“Grubhub deceptively portrayed Supper for Support as a win-win proposition for consumers and the restaurant,” the lawsuit alleges. “As the math makes clear, Supper for Support resulted in extraordinary support for Grubhub but not for struggling local restaurants.”
The lawsuit also alleges Grubhub violated the city’s emergency cap of 15% on restaurant commissions during the pandemic.
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