Uber is suing DoorDash, alleging that the rival delivery provider bullies restaurant chains into using its first-party delivery service by threatening to penalize them if they go with Uber.
In the complaint, filed Friday in California Superior Court, Uber alleges that DoorDash uses its large third-party ordering business as a cudgel to get restaurants to sign exclusive or preferred contracts for DoorDash Drive, its white-label delivery service.
The alleged tactics include threatening restaurants with multimillion-dollar penalties, higher fees or worse placement on the DoorDash marketplace if the restaurant plans to use Uber’s first-party service, Uber Direct.
Uber argued that the practices violate antitrust law and hurt competition.
A DoorDash spokesperson said Uber’s case is meritless. “Their claims are unfounded and based on their inability to offer merchants, consumers, or couriers a quality alternative,” the person said in a statement.
DoorDash added that restaurants that have stopped using DoorDash Drive later returned after trying other services.
The blockbuster lawsuit pits the country’s two largest third-party delivery players against one another at a time of rapid growth and heated competition in the delivery market. And it centers on a less-discussed part of the companies’ business model: first-party delivery, in which customers order through a restaurant’s own website or app, and Uber or DoorDash drivers handle the delivery.
According to the lawsuit, DoorDash has used coercive tactics to build a dominant position in the first-party delivery market. More than 90 of the 100 largest restaurant chains have an exclusive or preferred contract with DoorDash Drive, including brands like Burger King and Papa Johns.
At the same time, DoorDash handles more than half of all third-party delivery orders in the U.S. through its online marketplace, where consumers can order delivery from a variety of nearby restaurants. Uber argues that DoorDash has used that business as leverage to force restaurants to sign exclusive deals with its first-party service.
“Most restaurants have no meaningful option to resist DoorDash, given the power it wields through the DoorDash app in third-party delivery,” the lawsuit says.
According to Uber, the scheme has caused multiple restaurant chains to cancel deals with Uber and go with DoorDash against their will. It said that restaurants have told Uber they feel like they have a “gun to their head” and that DoorDash is bullying them.
Last year, for instance, a “significant restaurant company” abruptly cancelled a rollout of Uber Direct across several of its brands, even after it had already started using it at one brand and was happy with the service. The restaurant instead signed an exclusive agreement to use DoorDash Drive.
According to the lawsuit, DoorDash had allegedly threatened to increase the restaurant’s third-party delivery commissions if it went ahead with Uber Direct.
The suit goes on to list 17 other cases in which a restaurant chain was either already using or in negotiations to use Uber Direct, but broke off the relationship due to threats from DoorDash.
“We’ve increasingly heard complaints from restaurants that DoorDash’s tactics are limiting [their] freedom and punishing them for seeking better options,” said Sarfraz Maredia, Uber’s head of the Americas for delivery, in a statement. “We hope this filing puts an end to those unfair practices so that restaurants can choose what’s best for them without fear of penalty or retribution.”
Uber said it has lost millions of dollars in revenue and profit because of DoorDash’s tactics. It also argued that the tactics have hurt restaurants by stifling competition, allowing DoorDash to charge higher rates and provide worse service.
It has requested a jury trial in the case.
DoorDash and Uber have for years fought for share in the U.S. delivery market. DoorDash ascended to the No. 1 spot in 2019.
Both companies experienced a surge of demand during the pandemic and have continued to grow steadily since. In the fourth quarter of last year, Uber’s gross delivery bookings rose 18% year over year and DoorDash’s were up 21%.
In recent years, the companies have increasingly promoted their first-party delivery services as restaurants look to drive more orders through their own websites and apps. First-party ordering tends to be more profitable for the restaurant and provides more data on each transaction. DoorDash launched Drive in 2016, while Uber Direct debuted in 2020.
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