Having previously taken aim at DoorDash and Grubhub, but to no avail, the city of Chicago finally got a win this week.
On Monday, the Office of the Mayor of Chicago announced the city had reached a massive settlement with Uber (NYSE: UBER) platforms Uber Eats and Postmates. Uber will pay out a total of about $10 million, which includes around $3.3 million the company repaid merchants in 2021.
Lawmakers accused the food delivery platform of charging restaurants excessive fees during the pandemic and listing them on its apps without their consent. The allegations are similar to those the city made against Uber’s rivals.
While Uber in the settlement denied any wrongdoing, it agreed to pay out $2.25 million to restaurants for violating Chicago’s emergency commission cap during the pandemic. It will also pay merchants $500,000 for listing them without consent and provide another $2.5 million in commission waivers.
The remaining $1.5 million will be paid to the city to cover the costs and fees of its investigation, which, according to the mayor’s office, lasted about two years.
“[The] settlement reflects the city’s commitment to creating a fair and honest marketplace that protects both consumers and businesses from unlawful conduct,” Chicago Mayor Lori Lightfoot said 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.”
According to Lightfoot’s office, Uber’s platforms charged restaurants north of 15% in commission fees, violating a citywide emergency order that capped commission between November 2020 and April 2021. Other cities, including New York and San Francisco, enacted similar measures to help shield restaurants from limited demand during the pandemic.
Chicago on Monday also created a portal for restaurants claiming to have been listed on the platforms without consent to apply for the $2.5 million in commission waivers. The city has similarly targeted DoorDash and Grubhub for their listing practices, which have resulted in scams, wrongly priced items and customers ordering food that isn’t on the menu.
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The two apps, though, remain embroiled in lawsuits yet to be resolved. Uber instead went ahead and bit the bullet, much like it did earlier this year when it settled a lawsuit over driver pay in San Francisco.
The Illinois Restaurant Association (IRA), which represents thousands of merchants on Uber’s platforms in Chicago, quickly came out in support of the decision.
“We welcome any relief provided to the independent restaurants that struggled throughout the pandemic and continue to shoulder the rising costs of doing business,” Sam Toia, IRA president and CEO, said in a statement. “No third-party delivery company should be listing restaurants without their consent, and all third-party companies should have been following the emergency cap imposed during the pandemic.”
Unsurprisingly, Uber also was glad to have resolved the yearslong dispute while its rivals continue to rack up legal fees, all while legally denying any wrongdoing.
“We are committed to supporting Uber Eats restaurant partners in Chicago and are pleased to put this matter behind us,” an Uber spokesperson told Modern Shipper in an email statement.
The firm’s swift handling of the situation could act as a roadmap for its rivals.
According to Lightfoot’s office, Uber quickly refunded about $3.3 million to restaurants back in 2021, when the city first made its allegations. That early action may have helped the company keep the dispute out of federal court, which is where DoorDash and potentially Grubhub are headed.
Uber’s actions could also help it curry favor with merchants who view the company as more receptive to their concerns than its rivals. The same could be said for customers concerned with working conditions for delivery workers.
Of course, paying out millions of dollars won’t help Uber’s short-term quest for profitability, a relatively new concept for the company. But longer term, it could benefit the firm in removing legal hurdles down the road.
Click for more Modern Shipper articles by Jack Daleo.
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