Delivery services under legal scrutiny for alleged 'drip pricing'

The practice known as “drip pricing” is front and centre again in an action by the federal Competition Bureau against DoorDash and in a proposed class-action lawsuit brought by a Toronto law firm against Uber Eats. Drip pricing generally involves enticing customers by advertising low prices, but charging extra mandatory fees, usually when they are checking out. It continues to come under fire because “disclosure around pricing and fees in various consumer transactions is, at times, less than thorough and transparent,” says Mike Robb, partner with London, Ontario-based law firm, Siskinds. The Competition Bureau says w hen “the represented price is inaccurate, it makes it more difficult for consumers to comparison shop and result(s) in unfair outcomes for honest competitors.”   Why is DoorDash under scrutiny? Canada’s competition watchdog is hauling DoorDash Inc. and its Canadian subsidiary before the Competition Tribunal, accusing them of portraying the online cost of delivery as lower than the price consumers ultimately pay. The Competition Bureau says it investigated and is alleging DoorDash customers paid more, due to mandatory fees, added during checkout. The extra fees, the bureau says, include charges such as extra amounts for delivering items a further distance and for placing smaller orders. The bureau alleges the discretionary charges were sometimes framed as taxes. The bureau alleges DoorDash may have used drip pricing for close to a decade to make nearly $1 billion from mandatory fees, according to the Canadian Press. What remedy is the Competition Bureau asking for against DoorDash? The bureau is asking the Competition Tribunal to order the company to stop the practice, cease portraying fees as taxes, pay a penalty and issue restitution to affected consumers. However, DoorDash is pushing back. “This application is a misguided and excessive attempt to target one of Canada’s leading local commerce platforms,” DoorDash spokesperson Trent Hodson told CP . “It unfairly singles out DoorDash, and we intend to vigorously defend ourselves against these claims.” Still, the bureau is standing its ground. “Our litigation against DoorDash is another example of our efforts to ensure consumers are not misled and can trust the prices they see online. We urge all businesses to review their pricing practices and make sure they comply with the law,” said Matthew Boswell, commissioner of competition in a press release . The Competition Bureau has been more aggressive of late in battling drip pricing. Last fall, the bureau won a deceptive marketing case against Cineplex Inc. , noted Robb. It had been adding a mandatory $1.50 online booking fee. The company was ordered to pay a financial penalty of almost $39 million. Last summer, says Robb, the bureau reached an agreement with SiriusXM Canada . In that case, the company was ordered to pay a $3.3 million penalty over adding a fee on subscription plans that increased the monthly cost. Why a class-action against drip pricing? Meanwhile, legal action against drip pricing is not exclusive to public regulators. Law firms that navigate class actions are getting in on the act too. Toronto firm, Koskie Minsky filed a statement of claim against Uber Eats with the Ontario Superior Court Justice last month. It alleges Uber Eats has been hiding an additional service fee within its overall delivery costs. The proposed class action alleges that Uber misrepresented the true cost of delivery by not disclosing the service fee until the final stage of the transaction, “often obscured under a “Taxes & Other Fees” line item, a practice known as drip pricing,” says the law firm on its website. The action has been brought on behalf of Canadian residents who on or after May 16, 2023, placed a delivery order using Uber Eats and paid a service fee. Further, the lawsuit alleges Uber One members, who are supposed to enjoy benefits such as no delivery fees on eligible orders, have been paying the service fee. It’s “really a delivery fee as it only applies to delivery orders” and it “constitutes a breach of contract and negates the advertised benefit of the subscription.” Is there an advantage in a lawsuit over a regulator crackdown? Robb says “the existence of parallel proceedings in these cases is not necessarily surprising or unusual.” He explains that the Competition Bureau has a statutory mandate to protect Canadian consumers and businesses from allegedly unfair business practices. In its case against DoorDash , it is asking the Competition Tribunal to provide restitution to consumers, though that’s somewhat unusual, he says. “It may or may not be equipped to negotiate and deliver remedies to consumers.” However, he points out that class actions always focus on recovery for consumers, “even when the amounts are individually minimal. It is common in our cases that when they resolve, an administration mechanism is established to facilitate an accessible distribution of modest amount to individual consumers.” A recent example would be a payout website established for the bread-fixing class-action settlement.

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