Most consumers have encountered some kind of hidden fee in services they've bought. Companies of all sorts often try to sneak in surcharges to the unwitting customer, and people across the land are trying to do something about it. We previously wrote about legal activist You You Xue of California, who has taken San Francisco restaurants and arcades to court over junk fees and deceptive practices. At the national level, the U.S. Transportation Department under Biden tried to combat the same issue by implementing regulations across industries, including credit cards, internet services, and the aviation industry.
Now, the latest vigilante for consumer protection emerges from the north: Canada's Competition Bureau. Its latest opponent? DoorDash.
Consumer Protection in Canada
The Competition Bureau is a federal law enforcement agency responsible for administering and enforcing Canada’s Competition Act, which is designed to maintain and encourage competition in Canadian markets. The Bureau's primary role is to ensure that businesses operate in a fair and competitive manner, preventing anti-competitive practices such as price-fixing, misleading advertising, and abuse of market dominance. It investigates complaints, conducts inquiries, and takes legal action when necessary to protect consumers and promote a healthy economic environment. The Bureau also provides guidance to businesses on compliance with competition laws and advocates for policies that support competitive markets.
Canada also has a Competition Tribunal, a specialized adjudicative body in Canada that deals with cases related to competition law. It is responsible for hearing and deciding on cases involving anti-competitive practices such as mergers, abuse of dominance, and deceptive marketing practices. The Tribunal operates independently from the Competition Bureau, which investigates and enforces competition laws, and it functions similarly to a court, providing a forum for resolving disputes under the Competition Act.
Like the FTC, the Bureau can sue (Canadian) companies if they violate regulations. Earlier this week, it did just that by initiating legal proceedings in the Competition Tribunal against DoorDash Inc. and its Canadian subsidiary, DoorDash Technologies Canada.
‘Your Door to More [Fees]’
Those of you who love eating out without putting pants on will already know about DoorDash. In both Canada and the US, DoorDash’s core service, pricing structure, and user experience are very similar. Like UberEats and GrubHub, this online food delivery platform connects customers with local restaurants and independent delivery drivers via its app and website. Users browse menus, place orders, and have food or goods delivered to their door.
DoorDash makes money by charging delivery fees, service fees (a percentage of the order total), and sometimes small order fees. Restaurants may also pay commission fees to DoorDash. Tips for drivers are optional but encouraged. But what the unwitting user may not know is that prices on DoorDash may be higher than ordering directly from the restaurant, as restaurants can set higher menu prices to cover DoorDash’s commission. It is perfectly legal for them to do so.
But DoorDash goes a lot further with their fees. It essentially engages in what’s known as “drip pricing,” which is a bit similar to hidden fees, only seemingly more innocent. Drip pricing is a sales tactic where a company advertises a product or service at an initial lower price, but then adds mandatory fees later in the purchasing process, which are not disclosed upfront. This practice can be deceptive because consumers are not presented with an attainable price from the beginning, leading them to pay more than expected due to these hidden fees. With hidden fees, the charges are truly obscured or revealed after you've committed or paid, leaving you feeling surprised and potentially cheated. With drip pricing, the additional fees are revealed during the purchasing process, before you pay. You have the opportunity to see the total price before committing, even if it's frustrating.
If the prices are not truly hidden, what’s the problem? Well, many (including the Bureau) would argue that drip fees are still harmfully deceptive and unfair. It’s essentially advertising services at a lower price than what customers ultimately pay, due to the addition of mandatory fees at checkout. In DoorDash’s case, the semi-hidden fees include delivery fees, service fees, expanded range fees, small order fees, and regulatory response fees (we don’t know what that last one means, either). All of these have allegedly resulted in consumers paying higher prices or receiving lower discounts than initially advertised. The Bureau claims that DoorDash has been engaged in this conduct for nearly a decade, acquiring close to $1 billion in mandatory fees from consumers.
Complaint Filed Against DoorDash
Matthew Boswell, Canada's competition commissioner, has been vocal about the importance of combating drip pricing. He stated that businesses must not advertise unattainable prices only to add mandatory fees later on. Boswell emphasized that this litigation against DoorDash is another example of efforts to ensure consumers are not misled and can trust online prices.
The Bureau filed an application with the Competition Tribunal on Monday, calling DoorDash out. The legal action accuses the company of misleading consumers, calling its practices deceptive because they do not present consumers with an attainable price upfront. The lawsuit seeks to stop these deceptive pricing practices, impose a monetary penalty on DoorDash, and provide restitution to affected customers. Additionally, the Bureau alleges that DoorDash misrepresented certain fees as taxes, which are actually discretionary charges imposed by the company—now that’s definitely deceptive.
The legal proceedings against DoorDash are not an isolated incident but part of a broader effort by the Competition Bureau to tackle misleading pricing practices across various industries. In September 2024, the Bureau won a case against Cineplex for similar deceptive marketing practices involving drip pricing. The Competition Tribunal ordered Cineplex to pay $39 million and cease its misleading conduct.
Part of a Larger Pattern
DoorDash has denied the allegations and stated that it intends to defend itself against the claim. The company asserts that it does not hide fees or mislead consumers in any way. A company spokesperson, Parker Dorrough, stated that transparency is a "top priority" for DoorDash and emphasized that all fees are clearly labeled and disclosed to consumers throughout the ordering process, including a final review before payment. The company views the legal action as a misguided and excessive attempt to target one of Canada's leading local commerce platforms and believes it unfairly singles out DoorDash.
But this certainly isn’t the company’s first brush with the law when it comes to how it handles payments. DoorDash recently faced a significant legal challenge claiming that it improperly used tips meant for its delivery drivers. The case was resolved with a settlement in which DoorDash agreed to pay nearly $17 million (which we can only hope went to the drivers).
The implications of this lawsuit extend beyond DoorDash. Keldon Bester, executive director of the Canadian Anti-Monopoly Project, noted that delivery services are becoming increasingly integral to how Canadians engage with the economy. He highlighted that fair competition and transparent pricing are essential in this sector and suggested that other middlemen businesses like travel booking services could be subject to similar investigations.
Meanwhile, in the U.S., the federal government has largely ended its own push for fee transparency. Regardless of the outcome of the Canadian lawsuit, DoorDash will be free to continue its pricing practices in the U.S.
Related Resources:
- Something for Nothing Can Cost You Plenty in New Mail Delivery Scam (FindLaw's Law and Daily Life)
- Can I Sue a Food Delivery Company? (FindLaw's Learn About the Law)
- Pricing Disputes: You Pay the Lowest Marked Price (FindLaw's Law and Daily Life)
