Tech Check is a regular column on restaurant technology by Senior Editor Joe Guszkowski. It's also a newsletter.
On Valentine’s Day, Uber filed a lawsuit against DoorDash, signaling publicly that there is no love lost between the country’s two dominant food delivery services.
We wrote about the case in detail here. In short, Uber is accusing its rival of anti-competitive practices surrounding its white-label delivery product, DoorDash Drive. Uber claims that DoorDash is using illegal tactics to get restaurant chains to sign exclusive deals for Drive rather than Uber’s competing service, Uber Direct.
DoorDash called the allegations meritless and suggested that Drive, which launched four years before Direct, is simply a better product.
It’s a relatively rare example of two direct business competitors duking it out in court. And it could have a cascade of effects for delivery, restaurants and consumers.
Here are four thoughts on the case.
First-party delivery has a moment
One of the potential silver linings of the dispute is that it has drawn some attention to first-party delivery, a service that restaurants love but that many customers don’t seem to know about.
The average person knows DoorDash and Uber Eats as apps where they can order from a selection of nearby restaurants and have the food brought to their door by a gig worker. But many are likely not aware that the companies also handle delivery orders that are placed on restaurants’ own mobile apps or websites. This is known as first-party or white-label delivery.
Though first-party makes up a smaller part of the delivery providers’ overall business, it is at the heart of this lawsuit. And that shows that DoorDash and Uber view first-party orders as important.
This is good news for restaurants. First-party orders are generally viewed as more valuable than orders placed through DoorDash and Uber Eats because they have lower commissions and the restaurant gets to keep the customer data. But restaurants have struggled mightily to get customers to order that way rather than through those super popular delivery apps.
The case, though, suggests that Uber and DoorDash see first-party as an area of growth. And the fact that the two companies appear to be fighting fiercely for those orders should be good for restaurants in the long run. Competition helps keep prices low and improves quality—assuming, of course, that everyone is playing fairly. Which Uber claims DoorDash is not.
Which brings us to our next thought.
Uber’s argument has some question marks
I’m not a legal expert, but I talked to someone who is. Barry Barnett is a partner with Susman Godfrey, a law firm that specializes in commercial disputes. And he saw some issues with Uber’s case.
The exclusive deals that Uber is concerned about are not necessarily illegal, he said, nor are the hardball tactics DoorDash is allegedly using to get restaurants to sign them.
“There’s nothing illegal about competing hard, offering discounts. That’s the American way,” he said, referring to DoorDash’s alleged threats to raise its prices for restaurants if they sign with Uber. “What we worry about is where people lock markets up in such a way that in the future, they can raise prices and recoup more than they lost from giving discounts in the short run.”
He said that for Uber to prove that sort of lockup is happening, it would have to show that DoorDash is blocking it from accessing at least 30% of the relevant market. But Uber does not define that market in its complaint, he said, which could make its case more difficult to prove.
“If Uber Eats needs half a kajillion customers in order to be a competitor in the first-party delivery market, and if it can’t get that many because of what DoorDash is doing, it may have a claim,” he said.
The lawsuit serves a tactical purpose
Barnett also interpreted the lawsuit as a strategic attempt by Uber to gain some ground on DoorDash in the race for first-party delivery, which Uber is currently losing by a wide margin.
“It sort of feels like the case is competition by other means,” Barnett said.
He highlighted a statement from Uber’s American delivery chief, Sarfraz Maredia, who said, “We hope this filing puts an end to those unfair practices.”
“They’re sending a message to DoorDash that, look, we don’t like this, we want you to stop, and we’re gonna do what we need to do to show you that,” Barnett said. The case will force DoorDash to prove that its conduct is above board.
“They may also be saying to their customers, ‘Don’t fall for DoorDash’s tactics.’” he added. “We’re fighting it, and so, be brave and do what makes sense long-term.”
Restaurants aren’t taking sides
I reached out to numerous restaurants and restaurant organizations this week and got a similar answer from almost all of them: “No comment.”
The lack of a response underscored how intertwined the delivery companies have become with restaurants, and how much influence the companies have. Several of the restaurants I contacted said they couldn’t speak to me because they work with both services and didn’t want to appear to be taking sides.
A few did tell me, though, that they saw some hypocrisy in Uber’s complaint. Both Uber and Doordash fight hard for restaurant contracts and exclusive deals, they said. And restaurants often find themselves caught in the middle with few other options.