Warren, Casey, Luján Slam DoorDash and UberEats for Hidden Junk Fees, Demand Information About Fees and Ties to Executive Compensation

April 17, 2024

Warren, Casey, Luján Slam DoorDash and UberEats for Hidden Junk Fees, Demand Information About Fees and Ties to Executive Compensation

"A business model that can only work by overcharging customers and underpaying workers while executives and shareholders reap the benefits is unsustainable. When additional hidden fees nearly triple the price of an order, that is price gouging - plain and simple."

Text of Letter to DoorDash (PDF) | Text of Letter to UberEats (PDF)

Washington, D.C. - United States Senators Elizabeth Warren (D-Mass.), Bob Casey (D-Penn.), and Ben Ray Luján (D-N.M.) wrote to DoorDash and UberEats, the two largest delivery platforms, calling out their use of hidden junk fees to take advantage of American consumers trying to put food on the table while balancing busy schedules. UberEats amd DoorDash have taken advantage of consumers, who are relying more and more on delivery services to put food on the table while balancing difficult work schedules, caring for young children or elderly parents, and other obstacles, creating an opportunity for these delivery platforms to tack on confusing and unexplained fees, which can triple order prices in some cases.

American families are struggling with high food prices, and research shows that in many cases, corporate actions such as price gouging and shrinkflation are to blame. Big food companies used the supply chain shocks of the pandemic and recent inflation as a cover for raising their prices far higher than their increase in production costs. In recent years, consumers spent more than 11 percent of their disposable income on food.

Restaurants and stores often increase their listed prices to offset the huge fees that delivery platforms charge them for using their service, which can sometimes go up to 30 percent. Delivery platforms then add extra fees for delivery and other services to the existing markup. Fees can vary depending on location, distance, the number of items ordered, the amount of available delivery drivers, and general demand in the order area. While these fees can start off as small dollar amounts and percentages of an order subtotal, they quickly add up and the total markup on a food delivery order (before tip) can be as high as 95 percent. Worse, customers often cannot see the fees until just before paying, meaning a large portion of the total cost of ordering is hidden from customers until there is only one button left to press.

Platforms often provide insufficient explanations for where their service and delivery fees go, and the fees can sometimes cost more than the order itself.

While these companies continue to squeeze customers with hidden fees, they continue to line the pockets of executives and shareholders. Instead of reinvesting revenue in delivery workers' compensation or cutting down frivolous fees for consumers, both companies announced stock buybacks this year. In February 2024, DoorDash announced a $1.1 billion round of stock buybacks. In March 2024, UberEats initiated a $7 billion stock buyback. In 2020, DoorDash went public and had the highest-paid CEO in Silicon Valley, with a total compensation of nearly $413 million. Last year, Uber posted a full-year profit for the first time since going public in 2019 and paid its CEO more than $24 million.

Notably, this is not the first congressional investigation into DoorDash's and UberEats' fee structure. Senator Luján wrote to both companies last year about their high consumer fees and lack of transparency. The delivery companies' responses offer little clarity on customer fee structure.

Earlier this year, Senators Warren and Casey reintroduced the Price Gouging Prevention Act, which would give the FTC even stronger tools to crack down on corporate price gouging, and introduced the Shrinkflation Prevention Act, which would make clear the FTC has the authority to go after "shrinkflation" (when companies charge the same or a higher price for less of a product).

The lawmakers are requesting information about every type of fee or service charge the delivery platforms currently charge and their tie to executive compensation by May 15, 2024.

Senator Warren is a long-time champion for consumers, fighting back against rising prices:

• In February 2024, Senator Warren joined Senator Casey in introducing the Shrinkflation Prevention Act to crack down on corporations that deceive consumers by selling smaller sizes of their products without lowering prices. The bill follows recent reports on the effects of corporate greed on product size and rising inflation, and comes as companies continue to rake in super-sized profits by either raising prices excessively or shrinking the products they sell - all at the expense of American consumers.

• In February 2024, Senators Warren, Baldwin, and Casey and Rep. Schakowsky reintroduced the Price Gouging Prevention Act of 2024, which would protect consumers and prohibit corporate price gouging. The bill would authorize the Federal Trade Commission (FTC) and state attorneys general to enforce a federal ban against grossly excessive price increases, regardless of a seller's position in a supply chain.

• On February 17, 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits.

• That same month, on February 8, 2022, Senator Warren requested the Department of Justice to take aggressive action against corporations violating antitrust laws to hike prices for consumers.

• On January 13, 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.

• At a January 2022 hearing, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.

• In a New York Times op-ed published in April 2020, Senator Warren urged Congress to focus on cracking down on price gouging in its ongoing effort to address the impact of the coronavirus pandemic.

• In March 2020, Senator Warren joined her colleagues in urging the FTC to use its full authority to prevent abusive price gouging on consumer health products during the COVID-19 pandemic.

###

Public link

Please use the above public link if you want to share this noodl on another website.