Doordash: Customers are Being Overcharged on Orders (2020 - 2021)
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| Price Differences when using DoorDash |
Case Controversy
DoorDash is one of the pioneers among a new and fast-growing breed of delivery apps with an increasing popularity especially over the past year. When the covid-19 pandemic hit the United States in the early months of 2020 many restaurants closed and the few that remained open could not allow sitting in as a dining option for safety reasons. Since this happened more and more people began relying on food delivery services like Doordash, Grubhub, Uber Eats, and Postmates. As of March 2020 Doordash has been reported to have a market share of 42% in the meal delivery industry (Farviar). However, the source of the company's financial success has been at the stake of its customers. Many Doordash customers have reported that they are being charged ridiculous fees on orders without their knowledge.
Doordash hides tax and extra service costs into the bill. The typical item costs nearly 49% more when brought through a food delivery app, not always including tip or delivery fees (Chen). Delivery fees alone are an additional 20%to 30% charge on an order (Farviar). For example, at Subway two six-inch turkey breast sandwiches costs $12.58 plus a sales tax of $0.63 totaling $13.21 for the entire order. However, when ordered through Doordash the two six-inch turkey breast sandwiches cost $14.78 plus a delivery fee of $1.99, a service fee of 1.20 and a sales tax of $1.29 totalling $19.26. That is a 46% markup on the original price (Chen). But this is not a specific occurrence with chain restaurants. MakiMaki, a Japanese restaurant charges customers $12.95 for a particular item. The same item purchased through Doordash costs $14.80 (Stamm).
As a delivery service Doordash takes 13% to 40% of revenue from each order, while the average restaurant’s profit ranges from 3% to 9% of revenue (Dolmetsch). In order to try to ease the impact of fees customers have to pay, several cities have pushed back against Doordash by capping commissions at 15 % of the total cost of orders. By December of 2020 73 caps were put in place nationwide and 5 more by March of 2021. In response to the caps on commissions Doordash established a regulatory response fee. This additional fee is a fixed charge of $1 to $3 on top of existing delivery fees, service fees and sometimes small order fees (Forman).
On August 27th, 2021 the city of Chicago announced it was filing a consumer protection lawsuit against DoorDash and its competitor, GrubHub. Chicago policy makers, sued Doordash over their deitiful pricing and unnecessary charges on customer orders in July 2021. Regulators looking into the many hidden fees on Doordash recipes have also discovered a “Chicago fee”. This was a fee imposed by Doordash disguised as a fee from the city of Chicago to appear unrelated to their service fees. DoorDash has denied all of these claims, however, a hearing for this case is scheduled for December 27th, 2021. Spokesmen for the company have since then relabeled these charges as more regulatory response fees (Rana).
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| Timeline of events |
Stakeholders
The stakeholders in this case that are the key decision makers are the people in charge at doordash, including CEO Tony Xu. These are the people that decide what percent markup there is on the original price of a food item, the additional delivery, service and other fees that are not clearly stated when customers order using this app. The stakeholders affected were the shareholders and customers. Tony Xu and shareholders are affected as the profits of DoorDash belong to them and as such, any impact on them directly impacts the amount of money a shareholder makes from owning DoorDash, in addition, the public image and quarterly reports of DoorDash have a significant impact on the value of their investment in DoorDash. Millions of doordash customers that have been overcharged even if they haven’t realized it yet and the hundred of thousands of restaurants that are robbed of revenues and have been forced to use doordash to stay in business after the pandemic caused so many to close doors. Customers that have recognized that they are being overcharged are less likely to purchase food through Doordash again as it would be cheaper to pick up food from restaurants directly, doing away with the additional fees on top of delivery charges. The future customers of doordash are also at stake. Existing customers are likely to give Doordash a poor recommendation based on previous experience.
Individualism
An Individualist view of the DoorDash conflict reveals that DoorDash’s actions are at the very least morally questionable and would become morally wrong if Chicago’s lawsuit finds DoorDash to be in violation of the law. Under Individualism, businesses should maximize their profits while staying within the bounds of the law. While this is easily viewed from a short-term perspective the long-term perspective is also included as important according to Individualism. This long-term perspective is what makes DoorDash’s actions morally questionable.
Individualism places almost no responsibility in the hands of the shareholders and considers them exterior to the moral decisions made by employees of the company. Under individualism, the employees carry most of the responsibility, and as such most make decisions that maximize profits, or else the theory considers them to be stealing from their shareholders. From this perspective and considering the fact that DoorDash has stated that they believe they have not done anything illegal, it can be reasonably believed that the employees believed themselves to be acting as morally as possible. The only fact that calls this into question is that of long-term profits, has taking these actions harmed DoorDash’s ability to make money in the future? Government involvement throughout the DoorDash cases shows that the company may have hurt its future revenue by inciting the government to pass new legislation which would be immoral to violate. DoorDash’s reputation is also harmed by the negative press, damage to relationships with restaurants, and by the high prices as many consumers may now regard the service as too expensive. The long-term harm to the company makes this morally questionable, however, if it is determined that the company committed acts there were illegal, the situation becomes morally wrong.
Individualism’s view on this case will not become clear until a court makes a decision on their legality. However, due to negative long-term effects, the actions of DoorDash are at best morally questionable and quite possibly morally wrong.
Utilitarianism
When observed through an ethical lens, the one that most highlights the impermissible acts of the company is utilitarianism. This theory heavily relies on the fact that happiness is the only value, it is okay to do something immoral if it benefits more people. Utilitarianism decides if something is good for society or bad for society, and it does not leave a grey area. It can also be defined as: the ‘right’ action is the action that benefits the most people in society or a business, even if that action is not morally right.
Utilitarianism proves the actions of Door Dash as impermissible because not only is it bad for society, but Door Dash was also taking advantage of people during COVID-19 when money was tight for a lot of families. Meanwhile, Door Dash was pocketing the money of innocent people and making the community unhealthy and unhappy. Utilitarianism is the best theory to analyze this case because it highlights how many people were treated poorly because of the scandal. When analyzing through a utilitarian lens, it is apparent that many people were taken advantage of and harmed because they were being charged more than what they should have been paying for products. Utilitarianism is the best lens to examine the case.
The actions of the stakeholders were impermissible because they were fully aware of the unethical treatment of the customers. They were aware that they were stealing money from them, they knew it was wrong, but continued to do so. It is not morally right and is not making most customers happy because they are being charged extra for products priced far lower than what they are paying.
The actions of the DoorDash drivers are permissible because they had to keep their jobs and were not 100 percent aware of the fact that the company was being dishonest with the public. Even if they did know some of the details, they still were doing what they thought was best for the residents of Chicago; they delivered their food and worked their jobs.
The city of Chicago’s actions were morally required. However, it is not permissible because they needed to use taxpayer money to combat the company. This is because the city was aware of the injustices happening to the Chicagoans and how they were being taken advantage of and being overcharged. It was morally required for the city to take action against DoorDash to defend the people.
Kantianism
Kantianism is an ethical theory that requires everyone to act rationally, help others make rational decisions, respect people's autonomy and individual needs, and be motivated by good will. Kantianism follows the categorical imperative which is the supreme law of a reason. It enables us to determine if our actions are rational or irrational. Irrational actions are impermissible therefore wrong and immoral. Rational actions, on the other hand, are permissible, allowed as they are morally correct. Kant states “Act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means”. This is the formula of humanity under the categorical imperative which means to never treat humans as mere means, always as an end.
To determine if an action is permissible or impermissible Kantianism utilizes the formula of universal law. The first step is to formulate a maxim-for-action. In this instance of Doordash it is overcharging customers to increase commission on orders. The second step is to universalize the maxim. If Doordash is able to charge unnecessary fees to customers then all companies can add unnecessary charges for profit. The following step is to check for contradictions and charging additional unclear fees to customer orders in order to increase profit is deceitful. Therefore these actions are impermissible because Doordash is being deceitful. They tack on additional fees and overcharge product prices without customer knowledge. When doordash was called out for these fees a cap was placed on the amount of commissions doordash can take from orders and doordash lied and added an additional fee labeled as something else “regulatory response fee” to gain more profits. Doordash was also motivated by self interest. The company was not honest with their customers to gain a greater profit and Kant claims that it is only morally acceptable to be motivated by good will. For these reasons Kant would not believe that the actions of doordash are morally correct.
Virtue Theory
Virtue Theory is a theory that was created by Aristotle that focuses on rationality and whether a person is virtuous or not. Virtue Theory uses four cardinal virtues in determining if someone is virtuous. These four cardinal virtues are courage, honesty, temperance, and justice. According to Aristotle, rationality is what differentiates the characteristics of people. In order to live a virtuous life, people need to act rationally. He also states that you need to act rational to function well and therefore, people who function well live virtuous lives (Salazar, pg23).
From the point of view of Virtue Theory, DoorDash hasn’t displayed the 4 cardinal virtues, Courage, Temperance, Honesty, and Justice. They are not courageous in the sense that they are not standing up for the right ideas and actions within their business. Taking a risk like upcharging customers by large percentages is not right. When coming under fire with lawsuits, they didn’t display honesty by not commenting on the multiple hidden fees and higher pricings and instead dodged the questioning. The temperance, or realistic expectations and desires, of DoorDash was not displayed either. Even though they may have seen this as maximizing profit, it wasn’t realistic to expect consumers to not notice the inflation of meal cost on their platform. The final virtue, Justice, was never present with DoorDash. Their practices were unfair and are not a product of hard work and good ideas.
Action Plan
New York City "Dasher" in december.
Since the start of the covid-19 pandemic within the U.S. in early 2020, Doordash has been found to overcharge their customers by adding and hiding fees. Doordash did this to gain more profit on each order and got away with it because people did not have many other choices for food delivery services. In this process, however, Doordash was stealing from their customers. In order to become a more ethical company and maintain business Doordash needs to start removing all markups on original prices, the price on the restaurant menu should be the price the restaurant charges for the items. At this point in the ordering process the fees that are paid to Doordash should be fixed and laid out clearly. Driver compensation should be completely separate and DoorDash should not be entitled to any of the amount paid in that section. When purchasing through Doordash there should also be a clear location that allows the customer to tip the driver and restaurant separately, once again DoorDash should not be entitled to anything paid in this section. This makes it clear to the customer where their money is exactly going. The most crucial thing Doordash needs to do is clearly state each fee on the receipt. All charges should be laid out before the customer makes their purchase.
Having a new mission statement could be helpful in guiding Doordash to becoming a more ethical company. For example, Doordash could have a mission statement that the company strives to give customers a more convenient and honest way to enjoy their favorite meals while living a busy life. To maintain this mission statement Doordash should keep some core values in mind. These values could be service, trust, reputation, and safety. DoorDash's core business is a service and as such must be a leading core value to compete in such a market. Customers should feel they received the best service possible, an experience that leaves them with the food they desired and without any frustrations. Trust is an important factor in DoorDash’s business, restaurants, drivers, and customers must all trust that DoorDash has fairly handled the exchange and is not cheating any of the parties involved. Eroding this trust could have disastrous consequences for DoorDash’s business as all of these parties are required for their operation. A solid reputation is essential to DoorDash as it is what allows them to draw in more customers, drivers, and restaurants that are vital to the operation and growth of their marketplace. As a core part of DoorDash’s business involves having customers and drivers meet for the exchange, DoorDash must ensure this is done safely and dangerous individuals are not able to exploit their platform or risk damage to their business.
In order to maintain these values and ensure that the company does not start to practice unethical habits again there are some procedures that should be followed. It would be beneficial and productive for management to review the new conditions with employees and regularly inform of updates. The best thing that Doordash can do to prevent what has happened from occurring again is to regularly monitor how much customers are being charged on orders and analyze if it is realistic to pay that price. If any changes need to be made to the fees then these need to be clearly stated for customers to see that they do not feel robbed again. Since Doordash has tained their relationship with previous customers as a result of their unethical actions it is important for the company to have a new marketing strategy. This strategy specifically needs to be targeted towards customers that have been wronged by Doordash in the past. This marketing should focus greatly on the changes that Doordash is implementing which will reinforce the new mission statement. This new plan of action, if carried out correctly, will allow Doordash itself to stick to their own values to ensure that any existing and future customers receive the quality of service they hope to bring. Doordashes' new mission statement stresses the importance that the company strives to give customers more convenient and honest service. These things conform to the core values of service, trust, and reputation in a positive way. Ensuring that DoorDash is doing the right things will promote these core values and in turn, bring more customers and profits. This plan should push past customers to feel more comfortable using Doordash, in turn increasing the number of people that use the service. Although there are less fees, if Doordash can restore its relationship with the customers they have pushed away they can increase overall productivity.
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| The cost of using doordash, the price the customer paid vs coast charged by restaraunt. |
Jared Crawford, Ryley Gianni, Bella Arias, and Ethan Simard
References
Chen, Brian X. “Up to 91% More Expensive: How Delivery Apps Eat up Your Budget.” The New York Times. The New York Times, February 26, 2020. https://www.nytimes.com/2020/02/26/technology/personaltech/ubereats-doordash-postmates-grubhub-review.html.
Dolmetsch, Chris. “Lawsuit Alleges Grubhub, Uber Eats Are Driving up Meal Cost.” Time. Time, April 14, 2020. https://time.com/5820429/grubhub-uber-eats-doordash-lawsuit/.
Farviar, Cyrus. “DoorDash Pushes Back against Fee Delivery Commissions with New Charges.” NBCNews.com. NBCUniversal News Group, March 28, 2021. https://www.nbcnews.com/tech/tech-news/doordash-pushes-back-against-fee-delivery-commissions-new-charges-n1262088.
Forman, Laura. “Food-Delivery Regulation Is a Drama Worth Watching.” The Wall Street Journal. Dow Jones & Company, March 4, 2021. https://www.wsj.com/articles/food-delivery-regulation-is-a-drama-worth-watching-11614859201.
Rana, Preetika, and Heather Haddon. “DoorDash and Grubhub's Tussles with Regulators Heat up Following Pandemic Sales Boost.” The Wall Street Journal. Dow Jones & Company, September 11, 2021. https://www.wsj.com/articles/doordash-and-grubhubs-tussles-with-regulators-heat-up-following-pandemic-sales-boost-11631352780.
Salazar, Heather. “The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business.”
Stamm, Stephanie, Preetika Rana, and Heather Haddon. “Why Doordash and Uber Eats Delivery Is Costing You More.” The Wall Street Journal. Dow Jones & Company, May 8, 2021. https://www.wsj.com/articles/why-doordash-and-uber-eats-delivery-is-costing-you-more-11620466200.
