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DoorDash Must Defend Chicago’s Consumer Deception Lawsuit (1)

March 10, 2022, 2:40 PMUpdated: March 10, 2022, 8:40 PM

DoorDash Inc. will face Chicago’s unfair business practices suit because the city’s complaint plausibly alleges that reasonable consumers would be deceived by the food delivery service’s statements, a federal court in Illinois said.

The decision by the U.S. District Court for the Northern District of Illinois allows the city’s suit accusing DoorDash of engaging in unfair and deceptive business practices to proceed, but doesn’t have any bearing on which party ultimately will prevail.

DoorDash, in an email to Bloomberg Law, said it’s “confident” that once the court has the actual facts, it will be clear that the city’s suit is “baseless and a waste of taxpayer resources.”

The company intends “to vigorously defend this matter,” it said. DoorDash remains “committed to the Chicago customers, merchants, and communities” it serves, it also said.

The case puts DoorDash on the other side of a dispute that has been raging across the country regarding food service delivery fees—an issue that’s gained attention during the Covid-19 pandemic and resulting increase in the use of these services.

The company and its competitors, Grubhub Inc. and Uber Technologies Inc.’s Uber Eats, have sued New York City and San Francisco, saying caps they impose on restaurant fees interfere with the delivery services’ contract rights.

Website Orders

DoorDash takes online orders for certain restaurants from customers using its website and mobile apps. Its drivers pick up the food from a restaurant and deliver it to a customer. The service charges its partner restaurants fees and commissions.

The delivery service misleads consumers regarding its pricing, Chicago alleged. For example, it doesn’t disclose that its menu prices are higher than those of the restaurants, the city said. DoorDash also charges a higher delivery fee than that initially listed, it said.

DoorDash also doesn’t disclose that discounts apply only if the order is above a minimum amount; lists restaurants it doesn’t service; and charges a “Chicago” fee, misleadingly implying that the extra fee is required by the city, Chicago said.

The service also encourages customers to leave tips for its drivers, but then uses that money to lower its own payments to them, according to the opinion.

None of the alleged conduct is actually unfair or deceptive, DoorDash argued in its motion to dismiss the suit. The fees, pricing, promotions, and tipping structure are all disclosed at some point, it said.

The court disagreed. At this stage of the litigation, Chicago adequately identified statements and actions that could deceive reasonable consumers, it said.

For example, DoorDash’s website says that “100%" of a tip goes to the driver—a statement most consumers would understand to mean that the tip supplements the driver’s income, not that it’s used to reduce the service’s payment obligation, the court said.

At best, what a consumer would believe on the tipping and other issues is a question of fact that must be resolved by a jury, the court said in Wednesday’s opinion by Judge Robert W. Gettleman.

Gettleman ordered DoorDash to answer the complaint by April 14.

Cohen Milstein Sellers & Toll PLLC and the city’s law department represent Chicago. Forde & O’Meara LLP, Gibson, Dunn & Crutcher LLP, and Riley Safer Holmes & Cancila LLP represent DoorDash.

The case is Chicago v. Doordash, Inc., N.D. Ill., No. 21-cv-5162, 3/9/22.

(Updated to add DoorDash's comments in the second, third, and fourth paragraphs.)

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Carmen Castro-Pagán at ccastro-pagan@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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