Chicago sues DoorDash, Grubhub over business practices

The City of Chicago on Friday sued DoorDash and Grubhub, alleging the third-party delivery companies deceived customers and used unfair business practices.

The city said the lawsuits were the result of an investigation led by the Chicago’s Business Affairs and Consumer Protection commission and the city’s law department.

Grant Klinzman, a spokesman for Grubhub, said the lawsuit was “baseless.”

“Every single allegation is categorically wrong, and we will aggressively defend our business practices,” Klinzman said on behalf of the Chicago-based Grubhub. “We look forward to responding in court and are confident we will prevail.”

A spokesman for San Francisco-based DoorDash said, "This lawsuit is baseless. It is a waste of taxpayer resources, and Chicagoans should be outraged. 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. This lawsuit will cost taxpayers and deliver nothing."

Chicago’s lawsuit claimed the third-party platforms advertised delivery services for businesses that have not consented to being listed and concealed lower prices that restaurants offer directly to customers.

The city alleged both platforms used a “bait-and-switch” method to attract customers with low delivery fees, but charged additional fees when orders were about to be placed.

The city seeks more transparency, civil penalties and restitution for consumers and restaurants hurt by the alleged practices.

"As we stared down a global pandemic that shuttered businesses and drove people indoors, the defendants' meal delivery service apps became a primary way for people to feed themselves and their families, as well as support local restaurants," said Chicago Mayor Lori Lightfoot said in a 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,” Lightfoot continued.

Chicago’s suits include claims specific to each company.

The Grubhub complaint alleged that company deceptively shared telephone numbers for customers to connect with restaurants, but would charge the restaurants a commission for calls placed through those numbers, even if there was no order. The city also claimed Grubhub made “imposter websites” for restaurants to lure customers to its own platform.

In the DoorDash lawsuit, the city claimed the company misled customers about how their tips for drivers would be used.

In a November settlement in the District of Columbia, DoorDash agreed to pay $2.5 million in a lawsuit charging that the third-party delivery specialist misled consumers in Washington, D.C., about how tips were paid to drivers. The settlement included $1.5 million in relief that was to be paid to delivery workers, known as “Dashers,” as well as $750,000 to the District of Columbia and $250,000 that was to be directed to two charities in the city.

The complaints alleged that DoorDash and Grubhub’s misconduct has been going on for years and continues to this day.

The city said that at the height of the 2020 pandemic lockdown, about half of Chicago’s 7,500 restaurants had closed either temporarily or permanently.

“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,” said Kenneth Meyer, Chicago’s acting BACP commissioner.

“We heard from the hospitality industry and Chicago’s consumers about these unfair practices,” Meyer said, “and this action demonstrates we will hold non-complying businesses accountable.”

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