When we go online to order dinner, we are getting a lot more delivered than a bowl of Pad Thai. As they bring in billions of dollars in revenue, leading app-based services such as DoorDash and Grubhub are being compelled to pay out millions in fines and settlements to resolve wide-ranging allegations of misconduct.
As shown in Violation Tracker, U.S. market leader DoorDash has accumulated more than $43 million in penalties. Most of that has come in the past year. In February, the company paid over $16 million to settle allegations by the New York State Attorney General that it misled both consumers and delivery workers by using tips intended for workers to subsidize their guaranteed pay. A few months earlier, DoorDash agreed to pay over $11 million to resolve a similar case brought by the Illinois AG.
Around the same time, the Illinois AG and the Federal Trade Commission got Grubhub to pay over $25 million over its alleged deceptive business practices that harmed customers, delivery drivers, and restaurants. Grubhub, now owned by Wonder Group, allegedly misled consumers about the cost of delivery and the benefits of a Grubhub Plus subscription; misled drivers about the amount of money they could make; and listed restaurants on Grubhub’s app without their knowledge or consent, and in some instances, over their explicit objections.
The other giant of the U.S. market, Uber Eats, accounts for a portion of the $917 million in penalties paid by its parent Uber Technologies. For example, in 2022 the City of Chicago got the company to pay over $6 million to restaurants for overcharging commissions and for listing some establishments without their permission.
Delivery service misconduct is not limited to the United States. Recently, the European Commission fined the German company Delivery Hero, which operates in about 60 countries, the equivalent of $253 million for engaging in anti-competitive practices. As shown in Violation Tracker Global, that brought the penalty total for Delivery Hero and its subsidiaries to nearly $600 million. That includes fines for labor standards violations in Spain, privacy violations in Italy, consumer protection violations in Hungary, and antitrust violations in Chile.
DoorDash has faced legal challenges in its foreign operations as well. Recently, the company was fined the equivalent of about $1.3 million by the Australian government for sending over one million texts and emails which breached spam rules. It is being sued by the Canadian government for allegedly advertising misleading prices and discounts. DoorDash is in the process of acquiring its rival Deliveroo, which was fined by the French government in 2022 for abusing the freelance status of delivery workers.
Similar allegations have dogged other services such as Colombia-based Rappi, which has been fined in its home country as well as in places such as Argentina, Brazil, and Peru. Singapore-based Grab Holdings has paid several consumer protection fines in the Philippines. Last year, the government of India ordered Zomato to pay the equivalent of $90 million in taxes and fines for non-payment of certain taxes.
Food delivery is one of the world’s youngest industries, yet it already has one of the worst records for regulatory compliance. It remains to be seen whether governments can rein it in.