DoorDash sues online ordering company Olo for $7 million in damages. Olo was supposedly charging DoorDash higher fees than assessing other providers. Resulting in a violation of an arrangement between the two.
Olo’s spat with its most notable client has surfaced only weeks after the company debuted on the New York Stock Exchange with a spectacular initial public offering. Olo provides chain restaurants with online ordering, distribution integration, and other technology services.
DoorDash Sues Olo Over ’Most-Favored Nation’ Agreement Breach
In March 2017, DoorDash began collaborating with Olo, using its Rails and Dispatch platforms to link restaurants with delivery services. In a clause (called the most-favored-nation) at the time, Olo agreed that it would never charge DoorDash higher transaction fees than other companies.
According to New York Supreme Court documents, after DoorDash acquired Caviar, it discovered that Olo had broken its promise. Olo charged Caviar fees that were “significantly lower” than what it was charging DoorDash.
“For over three years, Olo has overcharged DoorDash. It inflated its profits by receiving tens of millions of dollars more from DoorDash than what DoorDash should have paid. Had Olo respected its [most-favored nation] deal,” according to court records.
DoorDash Sued Olo Before IPO
DoorDash accused Olo of using the extra revenue to bolster its financials ahead of its IPO.
“To maximize revenues for its IPO, Olo cheated its largest business partner,” said DoorDash. Olo had secured its business with a pledge. The fees Olo charged “would never be higher than the fees charged to any other delivery platform provider”.
As reported in some news outlets, Olo called the claims “baseless”.
Ahead of it’s IPO, Olo disclosed that DoorDash had sued in October of 2020 over this issue.
Olo filed a motion to dismiss the lawsuit in February. It claims that in November 2017, the companies renegotiated their original fee arrangement. As well as removing the most-favored-nation clauses.
Olo’s leading and most significant partner is DoorDash. Sales from DoorDash will account for 19.3 percent of its total earnings in 2020, according to Olo’s IPO prospectus.
