Canada’s competition watchdog has initiated legal action against food delivery giant DoorDash, alleging the company misled customers through deceptive pricing practices, specifically by adding mandatory fees later in the checkout process. This lawsuit targets a practice known as “drip pricing,” where the initial advertised price is lower than the final cost due to the addition of unavoidable charges. The move highlights increasing regulatory scrutiny on online pricing transparency and could have significant implications for DoorDash and the broader e-commerce and delivery sectors in Canada.
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The core of the complaint centers on allegations that DoorDash’s advertised prices and discounts on its website and app did not reflect the true cost consumers would pay. The Competition Bureau claims its investigation found that mandatory fees were added at checkout, resulting in customers paying more than initially displayed. In some instances, the bureau alleges these additional fees were misclassified to appear as “taxes.”
According to the Commissioner of Competition, Matthew Boswell, this practice contravenes Canadian law, which explicitly prohibits drip pricing. The bureau’s action is part of broader efforts to ensure consumers are not deceived by online pricing and can trust the advertised costs.
DoorDash Disputes Allegations
In response to the lawsuit, DoorDash has denied the Competition Bureau’s claims. The company stated it does not hide fees or mislead consumers, asserting that the bureau’s action is mistaken. DoorDash characterized the lawsuit as an “overly punitive attempt to make an example” of a leader in the local commerce space.
Implications of the Lawsuit
This lawsuit carries potential financial and reputational consequences for DoorDash, while also signaling a continued focus by Canadian regulators on online pricing transparency across industries.
Financial Stakes and Potential Penalties
The Competition Bureau’s application filed with the Competition Tribunal does not specify an exact fine amount. However, the bureau’s statement alleges that DoorDash has collected “nearly $1 billion in mandatory fees for consumers” over approximately a decade. This figure underscores the potential scale of the alleged practice and could serve as context for potential penalties or restitution sought by the tribunal. The bureau is also requesting that the tribunal order DoorDash to provide restitution to affected customers, though the mechanism and eligibility for such compensation remain unclear.
Regulatory Context and Past Cases
The legal action against DoorDash comes after amendments to the Competition Act in 2022 specifically recognized drip pricing as a harmful business practice. This demonstrates a clear legislative intent to curb such practices.
This isn’t the first time the Competition Bureau has targeted alleged misleading pricing in Canada. The bureau has previously taken action against other companies for similar conduct. For example, the Competition Tribunal found that furniture retailers Leons and The Brick used deceptive marketing for some discount offers. Similarly, Cineplex faced scrutiny and a tribunal determination regarding its online booking fees, which the bureau considered similar to drip pricing. These prior cases establish a pattern of regulatory enforcement against companies using potentially misleading online fee structures.
Still image from a video discussing DoorDash fees and their impact on consumers and workers in Canada
What Happens Next?
The lawsuit will now proceed before the Competition Tribunal. The tribunal will review the evidence from the Competition Bureau and DoorDash and determine the next steps, which could include a ruling on the merits of the case, imposing financial penalties, and potentially ordering restitution for customers. The outcome of this case could influence how online platforms, particularly those in the food delivery and e-commerce sectors, present pricing to Canadian consumers in the future. It reinforces the regulatory expectation for businesses to be transparent about all mandatory costs upfront.
