It’s been almost a year since Chicago — with great fervor — announced its twin lawsuits filed against third-party delivery companies DoorDash and Grubhub. And while Chicago’s lawsuits continue to toil in court, a path to a settlement emerged earlier this month in San Francisco where DoorDash and Grubhub are embroiled in their own lawsuits. Both companies are suing SF claiming a pandemic-era 15 percent fee cap, designed to lessen burdens on restaurants, is illegal. Restaurants nationwide have complained they couldn’t turn a profit on delivery due to the 30 to 40 percent cuts third parties would take from orders.
Under a proposed settlement in San Francisco, the 15 percent cap would remain for basic services like restaurant listings on apps and delivery services. But instead of limiting what the apps could make, restaurants would have the option to pay for premium services including SEO boosts, consulting, and credit card processing. Surprisingly, Uber helped make the proposal possible, as the San Francisco Chronicle reports that the ride-hailing service “served as a go-between” during negotiations. A Grubhub statement reads that “restaurants need more choices, not fewer, and this solution preserves their ability to opt into important services including marketing, advertising, consulting and delivery.”
Chicago enacted its own cap in November 2020, after restaurants complained to aldermen; it was the first instance of a governing body taking legal action against delivery apps in an attempt to hold them accountable for alleged unfair labor practices.
Even before COVID-19, restaurant owners complained about hidden costs and challenges associated with third-party delivery, but the pandemic’s economic conditions heightened their anger. As the novel coronavirus raged and made indoor dining less safe, third parties held more leverage controlling most of the delivery marketplace. Many of restaurant owners reiterated their frustrations during an infamous gathering with city council members in May 2020. The Chicago fee cap has since expired.
But the Chicago lawsuits are about more than the cap — it’s also about practices such as apps listing restaurants without their permission and including outdated menus and other information that could mislead customers. In June, Gov. J.B. Pritzker signed a bill that would make that practice illegal starting in January across Illinois.
Uber and Uber Eats aren’t the subjects of a Chicago lawsuit, but the company has an obvious vested interest in the legal actions against its competitors. The DoorDash suit has since moved to federal court, though no trial dates have been; attorneys on both sides continue to gather evidence. DoorDash and subsidiary Caviar tried to have their case dismissed, but a judge refused their motion in March. DoorDash’s argument was that it wasn’t being deceptive, and that the company was upfront about its charging structure including in regard to the infamous Chicago Fee that added $1.50 onto all orders placed within the city. City officials argued that DoorDash presented the fee as if it was a local tax.
The city amended its Grubhub complaint in February and added more allegations, saying the company misled customers, enticing them with discounts that forced restaurants to pay higher fees. Grubhub has also filed a motion to dismiss. A decision on the motion could come as early as August 4, according to Cohen Milstein Sellers & Toll, a law firm representing the city against both Grubhub and DoorDash. A Grubhub spokesperson referred to a prior company statement: “We are confident we will prove what we’ve said before: that the allegations in this lawsuit are simply incorrect. Grubhub will continue to aggressively defend our business while providing unwavering support to Chicago’s restaurants, diners and drivers.”
Neither DoorDash nor Grubhub would comment about what’s going on in San Francisco as it relates to Chicago, but there appears momentum to use the SF settlement proposal as a precedent in other cities.