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Saturday, Feb 04, 2023

Uber Eats to pay millions to Chicago restaurants for following a controversial growth playbook perfected by DoorDash

Uber Eats to pay millions to Chicago restaurants for following a controversial growth playbook perfected by DoorDash

The city of Chicago accused Uber Eats of listing restaurants on its platform without consent. The parties announced a settlement today.
Uber Eats and Postmates are paying the price for following in the footsteps of one of their chief rivals, DoorDash.

The two Uber-owned apps have reached a $10 million settlement with the city of Chicago after an investigation found they listed restaurants on their food delivery platforms without consent and violated city fee-cap laws enacted during the pandemic, according to an agreement announced Monday.

One of the strategies that helped DoorDash win the food delivery war was adding hundreds of restaurants to its app without permission. The policy infuriated restaurants, many of whom went public on social media when it happened. In-N-Out sued DoorDash as early as 2015 accusing the delivery company of listing the notoriously private burger chain on its app without consent.

But the fast-tracking of restaurant listings helped DoorDash grow its market share rapidly in the US. To keep up, rivals Uber Eats and Grubhub began adding restaurants without their consent. 

The settlement stems from a probe Chicago said it launched against Uber Eats two years ago. The Uber Eats investigation followed allegations that the app was listing restaurants without their consent and charging marketplace fees beyond the city's 15% cap. 

An Uber Eats spokesperson said the delivery company was happy with today's settlement.

"We are committed to supporting Uber Eats restaurant partners in Chicago and are pleased to put this matter behind us," the spokesperson said in a statement sent to Insider.

The city said in a press release that part of the $10 million settlement includes Uber paying more than $5 million in damages to Chicago restaurants that were listed without permission and paid fee caps beyond 15%. Some of those funds were already paid by Uber Eats last year, including $3.3 million in refunded marketplace fees. 

"Today's settlement reflects the City's commitment to creating a fair and honest marketplace that protects both consumers and businesses from unlawful conduct," said Mayor Lori Lightfoot in a statement. "Chicago's restaurant owners and workers work diligently to build their reputations and serve our residents and visitors. That's why our hospitality industry is so critical to our economy, and it only works when there is transparency and fair pricing. There is no room for deceptive and unfair practices."

After the pandemic hit, several major US cities, including San Francisco, New York City, Los Angeles, Chicago, and Seattle, enacted fee caps to protect profits for restaurants that relied solely on delivery to survive in-restaurant dining losses. California also passed a law that went into effect in 2021 that makes it illegal for delivery apps to list restaurants on their platforms without consent.  

Separately, last year, Chicago filed a lawsuit against DoorDash and Grubhub alleging unfair business practices. DoorDash, for example, was accused of using tips to pay itself, according to the lawsuit. 

The DoorDash and Grubhub lawsuits remain active. A hearing on both cases is set for December 13, according to a city representative
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