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Illustration: Aïda Amer/Axios

DoorDash dominated more of the news cycle than it should have this week, after an NYT article brought broad awareness to its idiosyncratic policy on tips. The company would give its "dashers" a guaranteed minimum fee for delivering food; that minimum included any tips. The result was that most tips ended up going to DoorDash rather than to the delivery workers.

Driving the news: After defending the policy as recently as last month, DoorDash CEO Tony Xu backtracked on Tuesday, tweeting, "Going forward, we’re changing our model - the new model will ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order."

The big picture: Americans encounter disaggregated prices every day. Retailers operate under a convention that prices exclude sales tax, so it's never entirely clear how much something is going to cost in total.

  • The implicit convention is that disaggregated prices reflect real-world allocations. Sales taxes go to the government; tips go to servers. The DoorDash backlash came because it violated that convention and effectively kept customers' tips for itself.
  • Ticketmaster catches flack for similar reasons. The various fees it tacks on seem fake, designed primarily to hide just how much tickets really cost.
  • Buying a car from a dealership is an experience fraught with countless fees and taxes, all of which inflate the total cost of the vehicle far above its headline price.
  • Airlines and hotels are also expert at luring in customers with low advertised prices, only to surprise them with a raft of unexpected fees.
  • Banks make billions of dollars in fees; some, like Aspiration, even set their stated price at zero and make the bulk of their revenue from “tips.” Lender Earnin does the same.
  • Even auction houses selling multimillion-dollar artworks play this game, artificially breaking the final price into a "hammer price" and a "buyer's premium." Buyers bid on the hammer price and can then find themselves on the hook for millions of dollars extra.

Why it matters: Budgeting and spending decisions become much more difficult when all-in prices are mostly invisible. Retailers who disaggregate their prices end up selling more, even as their customers trust them less.

Go deeper

Dan Primack, author of Pro Rata
39 mins ago - Podcasts

Robert Downey Jr. launches VC funds to help save the planet

Robert Downey Jr. on Wednesday announced the launch of two venture capital funds focused on startups in the sustainability sector, the latest evolution of a project he launched two years ago called Footprint Collective.

Between the lines: This is a bit of life imitating art, as Downey Jr. spent 11 films portraying a character who sought to save the planet (or, in some cases, the universe).

DHS warns of "heightened threat" because of domestic extremism

Supporters of former President Trump protest inside the U.S. Capitol on Jan. 6. Photo: Roberto Schmidt/AFP via Getty Images

The Department of Homeland Security on Wednesday issued an advisory warning of a "heightened threat environment" in the U.S. because of "ideologically-motivated violent extremists."

Why it matters: DHS believes the threat of violence will persist for "weeks" following President Biden's inauguration. The extremists include those who opposed the presidential transition, people spurred by "grievances fueled by false narratives" and "anger over COVID-19 restrictions ... and police use of force[.]"

OIG: HHS misused millions of dollars intended for public health threats

Vaccine vials. Photo: Punit Paranjpe/AFP via Getty Images

The U.S. Office of Special Counsel alerted the White House and Congress on Wednesday of an investigation that found the Department of Health and Human Services misused millions of dollars that were budgeted for vaccine research and public health emergencies for Ebola, Zika and now the COVID-19 pandemic.

Why it matters: The more than 200-page investigation corroborated claims from a whistleblower, showing the agency's violation of the Purpose Statute spanned both the Obama and Trump administrations and paid for unrelated projects like salaries, news subscriptions and the removal of office furniture.