Canada’s Competition Bureau is suing San Francisco-based food delivery app DoorDash and its Canadian subsidiary for allegedly promoting services to customers at a lower price than what they actually have to pay—a practice known as drip pricing.
The Bureau alleges that, through an investigation, it found consumers were unable to purchase food and other items at the price advertised on DoorDash’s websites and mobile applications due to the addition of mandatory fees at checkout. DoorDash has been engaging in this practice for close to a decade and acquired nearly $1 billion from the mandatory fees, the Bureau claims.
In a blog post on its website, DoorDash said “Canada’s Competition Bureau got this wrong,” and that it will defend itself “vigorously against these claims.” DoorDash claims its fees are always disclosed to customers throughout the ordering process, including a final review before payment is submitted.
“We believe that this application is an overly punitive attempt to make an example of an industry leader in local commerce,” the company said in a statement.
DoorDash does charge fees on delivery orders made through its platform. These include service fees, delivery fees, expanded range fees, small order fees, and regulatory response fees, according to the Bureau, which claimed that these fees result in consumers paying higher prices or receiving lower discounts than advertised.
The Bureau is also taking issue with the way the fees are represented on the platform, which it said can give the impression that they are taxes rather than fees charged by DoorDash. Customers outside of Québec are presented with a single line item labelled “Fees & Estimated Tax.”
The Bureau’s lawsuit filed to the Competition Tribunal asks that DoorDash cease its “deceptive” price and discount advertising, stop portraying fees as taxes, pay an undetermined penalty, and issue restitution to affected customers who used DoorDash’s platform.
Amendments to the Competition Act in June 2022 explicitly recognized drip pricing as a harmful business practice, which the Bureau put into practice in a case against theatre chain Cineplex for its $1.50 online booking fee. The Bureau won the case this past September, penalizing Cineplex with a nearly $39-million fine. Cineplex has appealed the decision.
“Parliament has made it clear that businesses must not engage in drip pricing by advertising unattainable prices and then adding mandatory fees,” Commissioner of Competition Matthew Boswell said in a statement, urging businesses to review their pricing practices.
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“Our litigation against DoorDash is another example of our efforts to ensure consumers are not misled and can trust the prices they see online,” he added.
While Google Canada’s former head of partnerships, Rory Capern, questioned Canada’s leverage to regulate Big Tech on the BetaKit Podcast last year, the country and its Competition Bureau have sharpened their knives as of late. The Bureau went after Google in November for what it called anti-competitive conduct in Canada’s online advertising technology services, seeking an order that would require Google to sell two of its adtech tools and pay penalties. Canada also ordered social media giant TikTok to wind up its operations in the country after a national security review under the Investment Canada Act, but stopped short of an outright ban.
In both the above cases, Canada was following the precedent of similar cases in the United States, but that doesn’t appear to be the case this time. DoorDash’s most recent legal trouble south of the border resulted in a nearly $17-million settlement over unpaid tips in New York state.
Feature image courtesy DoorDash.