DoorDash Is Hiking Customer Fees to Pay for a Law It Helped Write

DoorDash has spent the past few months quietly adding new fees for users on its app.
January 8, 2021, 2:00pm
In the months since a coalition of app-based gig companies successfully passed Prop 22 in California, exempting themselves from reclassifying their workers as employees, DoorDash has been silently passing costs onto consumers.  The company-funded Yes on P
Bloomberg / Contributor

In the months since a coalition of app-based gig companies successfully passed Prop 22 in California, exempting themselves from reclassifying their workers as employees, DoorDash has been silently passing costs onto consumers.

The company-funded Yes on Prop 22 campaign claimed that not passing the ballot initiative would result in higher prices for consumers, and in early December, news first broke that gig companies would be charging more anyway to cover the cost of benefits promised in Prop 22 such as a healthcare stipend and a minimum pay guarantee. It’s also not clear whether these new benefits warrant price hikes as an October 2019 study by the Berkeley Labor Center of Proposition 22 found that driver pay would come out to $5.64 an hour. Nonetheless, companies in the coalition signaled they'd have to pass costs onto consumers instead of absorbing them into their already unprofitable enterprises. 

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Now, DoorDash is raising its service fee to 15 percent in California, which according to an in-app description "helps us operate DoorDash & provide a minimum pay guarantee to California Dashers. Service fees are, according to DoorDash, also calibrated by market demand and Motherboard has seen receipts where the service fee jumped as high as 21 percent.

A DoorDash spokesperson told Motherboard that the company is raising fee percentages for orders in California to cover Prop 22 and is keeping a close eye on the impact of these various price hikes and fee increases, adjusting them when necessary. It’s important to remember, however, that for DoorDash and other companies, that usually means when a policy is affecting the gig economy’s schemes to realize previously illegal profits.

Recently, DoorDash has been experimenting with how to respond to the wave of governments nationwide placing caps on the fees that third-party delivery services charge restaurants. DoorDash has already introduced additional fees for customers in Denver and Chicago and abandoned plans to hike fees for Washington D.C. restaurants using DashPass, but has silently introduced new fees in California to offset commission caps introduced by regulators. 

DoorDash also has a history of passing the costs of regulation on to customers. In November, San Mateo County introduced a 15 percent commission cap, which DoorDash responded to with a $2 "San Mateo County Fee.” In September, Fresno's City Council introduced a 15 percent cap to help restaurants struggling during the pandemic, leading to DoorDash adding a $1 “Fresno Fee” on orders in the city. A more general $1.50 surcharge titled "Regulatory Response Fee" appears elsewhere, both in California cities like San Jose and Mountain View, but also cities in Oregon and Washington (the latter of which is home to the only statewide cap). Each of these fees offer largely identical in-app descriptions, explaining they allow DoorDash to "continue to offer you convenient delivery while ensuring that Dashers are active and earning."

The fees, however, don’t ensure food delivery remains convenient so much as they ensure DoorDash can subsidize the prices. DoorDash’s enterprise is an unprofitable and unsustainable one—it offered “convenient delivery” before going public because it was flush in venture capital and will offer “convenient delivery” now because its IPO raised billions more in investor capital despite never turning a profit.

Now that it is facing the possibility of more caps and regulatory action, it appears DoorDash was right when it warned investors that its business model—specifically, its pay model—were investment risks. If regulators reduce its ability to minimize labor costs and raise revenues from restaurants and delivery drivers, DoorDash (and other affected gig companies) will be forced to increasingly hike fees on consumers and risk losing them to competitors or traditional restaurant delivery options.