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That Price Hike Delivery Apps Threatened If Prop 22 Failed? It’s Happening Anyway

Prices on every Uber Eats and Doordash order are expected to rise by December 16

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World Economy
To cover costs from Prop 22, delivery apps are charging customers more
Photo by Jakub Porzycki/NurPhoto via Getty Images

Folks who voted for Proposition 22 in hopes that it would keep gig worker-supported services like food delivery cheaper might be in for a surprise the next time they place an order on their favorite app. This week, companies including Uber Eats and Doordash say that customers will pay higher prices across California, as fees are increased to offer workers a benefits package in lieu of classifying drivers as employees.

The ballot measure, which was approved by California voters in the November 2020 election, was the most expensive in state history. Companies like Uber, Instacart, Postmates, and Doordash put over $218 million into the campaign, which sought to exempt their massive fleet of delivery workers, so-called “shoppers,” and ride-hail drivers from California’s employee protections. Instead, the companies argued, they’d offer workers their own benefits packages, including minimum pay rates and a stipend or subsidy for health care.

As part of the campaign, the companies said that if Prop 22 didn’t pass and they were required to treat their workers as employees, there was a strong likelihood that they’d either shut down operations in California or hike prices, as the costs to provide those workers with full benefits would be far too high. When the measure passed, Doordash CEO and co-founder Tony Xu said that its triumph was a “victory” for customers, as “Doordash will continue to be accessible throughout California.”

He failed to mention that the victory was conditional: Starting on December 16, prices are expected to be higher across every order. According to a Doordash spokesperson who spoke with Eater SF, while diners shouldn’t see “a single, flat fee,” the company is “exploring slight percentage increases in the service fees” for all orders across the state. Customers should also look for “certain promotion adjustments” to products like its Dash Pass offering, which currently promises no-fee delivery on certain orders for a flat $9.99 per month.

Over at Uber, CEO Dara Khosrowshahi first suggested that customers would start paying more during its quarterly earnings call just two days after Prop 22 won at the polls. Executing on the promises presented during the Prop 22 campaign “may have some implication as it relates to rates,” he said, but didn’t offer additional details. This week, Khosrowshahi announced Uber’s Prop 22 benefits package, which (among other things) promises delivery workers a 30 cent per mile reimbursement and pay rates of “at least 20% more” than a city’s minimum wage while actively picking up or dropping off an order.

But that, too, will come with a cost: According to an Uber spokesperson who spoke with Eater SF, as of December 14, Eats customers in California will see an increase of between 99 cents to $2 per order. Uber’s home city of San Francisco will be on the top end of that, at $2 per order, while down in Los Angeles, customers will be charged an additional 99 cents for every Eats delivery. According to a spokesperson for Postmates, which Uber officially acquired on December 1, “at this time, Postmates pricing remains the same for customers.”

In a statement posted to Twitter, Gig Workers Rising, the leading opponent of Prop 22, decried the fees as “a corporate bait and switch.”

“Uber and other app corporations said time and again during their Prop. 22 campaign that if the measure failed to go through, riders could expect higher rates,” Gig Workers Rising wrote. “Now that Prop. 22 has passed, Uber is announcing that riders will have to shoulder increased costs after all so that the company can continue to skirt its responsibilities to workers.”

The California Labor Federation, a coalition of over 2 million workers across over 1,200 unions, also decried the additional fees, saying via tweet that “Instead of paying their workers, gig corporations pumped $200M to pass Prop 22, claiming the worker protections guaranteed under the law would force them to drive up cost & pass it on to customers. Well guess what? They did it anyways. It’s honestly disgusting at this point.”

Disgusting it may be, but it might also be necessary. In the same earnings call during which Khosrowshahi suggested that offering drivers some benefits might have a rate impact, he revealed that Uber lost $1.09 billion last quarter alone. The company lost $8.5 billion in 2019, and with $2.65 billion going to its Postmates acquisition this year, that number is unlikely to drop for 2020. The company, founded in 2009, has yet to turn a profit.

Then there’s Doordash, which just last week stunned analysts with its billionaire-making IPO. Its opening day stock price created a valuation of about 17 times revenue, which equities expert Eric Schiffer tells CNBC is “stone-cold crazy.” According to a filing with the SEC, Doordash has also lost money every year since it was founded in 2013, and admits that it “may not be able to maintain or increase profitability in the future.” In fact, the company said, “we expect the growth rates in revenue, Total Orders, and Marketplace [gross order value] to decline in future periods.”