Chicago Inks $10M Settlement In Uber Eats Probe

Chicago has finally signed a $10 million settlement with Uber Eats and Postmates to resolve the city's investigation into purported misconduct by the meal delivery platforms during the pandemic, saying Monday that the deal closes a two-year probe into the apps' practice of listing restaurants without their consent.

The city's probe stemmed from the unwanted listings of Chicago restaurants on the apps owned by San Francisco-based Uber Technologies Inc., according to Mayor Lori Lightfoot's office. The city said Uber Eats and Postmates also violated Chicago's emergency fee cap ordinance during the COVID-19 pandemic and engaged in other advertising-related misconduct.

"The city contends that Uber charged food dispensing establishments in excess of 15% of these businesses' monthly net sales earned through its third-party food delivery services, in violation of the city's emergency fee cap ordinances," according to the 12-page settlement signed in November by Sarfraz Maredia, Uber Technologies' vice president of delivery at Uber Eats, and Stephen J. Kane, deputy corporation counsel for Chicago.

Betsy A. Miller, a Cohen Milstein Sellers & Toll PLLC lawyer who represented Chicago in the matter, told Law360 on Monday that Chicago in 2021 began to receive a variety of complaints from restaurants about the Uber Eats, Postmates, Grubhub and DoorDash delivery apps. The restaurants complained that the apps' commissions were too high, that eateries were being listed without permission, and that the apps were engaged in deceptive pricing on their platforms.

"During the pandemic in Chicago, half of the city's 7,500 registered restaurants closed at some point," Miller said. "Consumers needed to get their food, restaurants were trying to provide it, and this technology was in some ways making it possible, but restaurants also were reporting significant concerns of potential misrepresentations and unfair business practices. All companies have a right to try to form a business model in a safe, honest and fair marketplace and see if it works. But when the city began investigating, what it found was a variety of potential violations of its consumer protection laws."

The city reached out to all three companies about the possibility of resolution without litigation, but it was only with Uber that settlement talks proved fruitful, Miller said.

Separate suits Chicago filed against GrubHub and DoorDash in August 2021 remain pending. They accuse those food-delivery platforms of using deceptive practices to fool customers into paying higher prices, claiming that the companies violated the city's municipal code by advertising order and delivery services from restaurants without their consent, engaging in bait-and-switch tactics by jacking up prices at the end of a delivery, and advertising menu prices higher than if a customer ordered directly from the restaurant.

The federal court now presiding over Chicago's suit against DoorDash has denied DoorDash's motion to dismiss, and the parties are currently engaged in the discovery process. Meanwhile, the state court presiding over the city's suit against Grubhub denied part of Grubhub's motion to dismiss and requested supplemental briefing on another aspect of Grubhub's motion. The parties completed the supplemental briefing and will appear for a hearing on Dec. 13.

Lightfoot said in a statement that the Uber settlement reflects Chicago's commitment to a fair marketplace that protects businesses and consumers from illegal activity.

"Chicago's restaurant owners and workers work diligently to build their reputations and serve our residents and visitors," the mayor said. "That's why our hospitality industry is so critical to our economy, and it only works when there is transparency and fair pricing. There is no room for deceptive and unfair practices."

The city asserts in the settlement agreement that Uber deceptively advertised that Eats Pass and Postmates Unlimited subscribers would receive "free delivery" or "$0 delivery fees," and that it deceptively advertised that certain merchants were "exclusive to" or "only on" the platforms.

In addition, Uber allegedly linked its platforms to the "Order" buttons on merchants' business listings on Google Search and Google Maps without adequate disclosure to consumers and without the merchants' consent, the settlement said.

Uber denies the city's contentions, according to the settlement.

"Uber maintains that Uber accurately advertised merchants as 'exclusive to' or 'only on' the platforms where merchants expressly agreed to be exclusive on the platforms; and ... Uber states on information and belief that Google LLC controlled whether the platforms were linked to the Order buttons in the merchants' Google business listing," the settlement said.

Ultimately, following the city's June 28, 2021, cease-and-desist demand, Uber completed the removal of unaffiliated Chicago merchants listed on its platforms and agreed not to list any unaffiliated merchants without written consent in the future, according to the settlement.

The $10 million deal includes Uber's $3.33 million payment to Chicago in September 2021 after the city discovered the fee-capping misconduct, a new payment of $2.25 million to restaurants that were charged commissions above the limits set by the city's emergency fee cap, $2.5 million in commission waivers to restaurants listed without their consent, and a $1.5 million payment to cover the city's investigation costs and fees.

A spokesperson for Uber said the tech giant is "really pleased" to have found an outcome that worked for restaurants and the city.

"We are committed to supporting Uber Eats restaurant partners in Chicago and are pleased to put this matter behind us," the spokesperson said in a statement.

The city in the Uber matter is represented in-house by Stephen J. Kane and Peter Cavanaugh, and by Betsy A. Miller, Peter Ketcham-Colwill and Johanna M. Hickman of Cohen Milstein Sellers & Toll PLLC.

Counsel information for Uber was unavailable.