District of Columbia Attorney General Karl Racine has sued DoorDash, alleging that the startup misled customers to believe they were tipping couriers when the company was actually using the money for its operations.
In a lawsuit filed in the Superior Court of D.C., the AG’s office called DoorDash’s tipping operation “deceptive trade practices.”
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“Any reasonable consumer would have expected that the “tip” they added to the delivery charge through the DoorDash checkout screenflow would be provided to the Dasher on top of the payment promised by DoorDash for the delivery,” the lawsuit stated. “But during the relevant time period, that was not the case. Instead, DoorDash used consumer tips to subsidize the Guaranteed Amount payment it promised to Dashers.”
The lawsuit states that while DoorDash did address its payment model through an FAQ on its website, the statements about it were confusing and misleading.
DoorDash faced intense backlash over its tipping practices earlier this year, and in late August the company said it would change the model. Instacart also faced similar pressure, and changed its practices.
“We strongly disagree with and are disappointed by the action taken today. Transparency is of paramount importance, which is why we publicly disclosed how our previous pay model worked in communications specifically created for Dashers, consumers, and the general public starting in 2017,” a DoorDash spokeswoman said in a statement. “We’ve also worked with an independent third party to verify that we have always paid 100 percent of tips to Dashers. We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”
DoorDash has raised $2.1 billion in total funding, according to Crunchbase.
Illustration: Li-Anne Dias