DoorDash Takes Action Against San Francisco’s Unnecessary, Harmful and Unconstitutional Permanent Price Control

Today, DoorDash and Grubhub filed a lawsuit against the City of San Francisco in response to the San Francisco Board of Supervisors’ (BOS) unprecedented decision to enact a permanent price control, preventing restaurants and third-party delivery platforms from freely negotiating the price that platforms may charge restaurants for various levels of service. Our goal is to be a strong partner to all of our stakeholders in every community we serve — especially our hometown — and we view litigation as a last resort. We are compelled to take this step today because this permanent price control will likely hurt those it claims to help and instead lead to reduced choice for local restaurants in how best to run their business, higher prices for consumers, and fewer earnings opportunities for Dashers.

DoorDash’s mission is to empower local economies, and at no time was this mission more important than during the pandemic, when indoor dining was curtailed or prohibited altogether. Throughout COVID-19, DoorDash has supported local restaurants, providing over $120 million in relief including through reduced commissions and donating $10 million to restaurants via restaurant relief funds, with 50 local San Francisco restaurants receiving grants as part of those efforts. In addition, last year we created the Main Street Strong Pledge, a five-year, $200 million commitment to support and empower local communities, including restaurants.

Unnecessary

Having listened to our restaurant partners, we know that one size does not fit all, so we’re constantly working to increase and improve the ways local restaurants can partner with DoorDash. Over the past year, this has included new pricing tiers and options that enable restaurants to accept orders from customers online, better showcase their restaurant to customers and potential customers, and get orders delivered — or almost any combination of those three. Some restaurants use our Self Delivery product to reach more customers via DoorDash while using their own in-house fleet to make deliveries. For those who partner with us to power delivery, the fees they pay cover things like credit card processing costs, insurance, support agents, background checks, marketing and advertising for restaurants, app and website maintenance, and most importantly, Dasher pay.

Today, merchants already have an array of choices when it comes to partnering with DoorDash, options that are designed to offer them flexibility and transparency so that they can decide what works best to help power their business. The plans from which restaurants can choose include a delivery plan with a 15% commission rate, along with commission-free options, like Storefront. Given the options available to local restaurants, a one-size-fits-all permanent price control like the one enacted in San Francisco is entirely unnecessary.

Harmful

We are committed to bringing renewed vibrancy to San Francisco’s local restaurants now that restrictions imposed during COVID are lifting and dining rooms begin to fill. We seek to provide Merchants with options and tools to decide how to grow their businesses. Unfortunately, this permanent price control likely takes us in the opposite direction — reducing choice for restaurants, and having the additional unintended negative consequences of raising prices for consumers and providing Dashers with fewer delivery opportunities.

Echoing the concerns of merchants and Dashers who spoke out against this permanent price control, Mayor London Breed recognized the negative impact and declined to sign the bill, stating, “Though I appreciate an intent to continue to protect our small businesses, this ordinance is unnecessarily prescriptive in limiting the business models of the third-party organizations, and oversteps what is necessary for the public good.”

While price controls intend to regulate terms between delivery platforms and merchants, this unprecedented policy also hurts Dashers. “Delivery was a lifeline for me and restaurants across the city, but I fear that may change for both of us now that this permanent cap is in place,” commented San Francisco Dasher, Mike Gilgoff. “If this permanent cap remains in place, it will drive up prices for customers which will drive down the number of orders being placed. Lower demand means fewer earning opportunities for Dashers, ultimately impacting my income.” The greatest impact of these policies is often felt by those who are most vulnerable.

Unconstitutional

Price controls impermissibly restrain platforms’ and merchants’ constitutional rights — without any legitimate justification — by disrupting freely negotiated contracts between private parties and permanently dictating the economic terms on which an industry operates. For these reasons, price controls are largely unprecedented and typically reserved for public utilities that provide necessities, such as water or electricity, and where there is only one provider of that necessity (i.e., only one choice). Enacting price controls to regulate a highly competitive market, particularly where merchants have many options for how they may facilitate delivery, sets a dangerous precedent.

As we return to a new normal and continue to support merchants everywhere, our goal remains the same: we are committed to keeping small businesses in the driver’s seat and pursuing solutions that set up merchants for success. Our commitment to that is unwavering and why we believe it was necessary to act today.