DoorDash, Grubhub, Uber Eats sue NYC for trying to permanently cap delivery fees
We'll just hike the prices for customers, otherwise. Happy now?
Three of biggest US food delivery outfits – DoorDash, Uber Eats, and Grubhub – have sued New York City to stop it enforcing a limit on the fees they can extract from restaurants.
In May 2020, the city temporarily ordered food delivery apps to charge restaurants no more than about 20 per cent of each order total to deliver takeout – 15 per cent for the actual deliveries, five per cent for being listed in the app, plus payment processing fees. The's city order was set to end in 90 days though it was later extended until February 2022.
A bill passed by the city in August this year, however, proposed making this cap permanent. It has yet to be signed into effect by Mayor Bill de Blasio. Now, in an attempt to block the bill, all three tech companies jointly filed a lawsuit [PDF] against New York City in federal court on Thursday. The trio are seeking an injunction to stop the proposal from being passed.
New York City councilors believe the bill better supports restaurants and their patrons. But DoorDash, Uber Eats, and Grubhub believe it is unconstitutional and will harm businesses and their customers.
“The ordinance is unconstitutional because, among other things, it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates,” according to the complaint.
Representatives from Grubhub and DoorDash told The Register the bill may lead to an increase in delivery fees for customers, making the whole experience more expensive for hungry New Yorkers.
Don't forget: these app companies charge the restaurant and the customer for each order, so if the delivery giants can't make the eateries pay more, the punters will have to cough up the difference. Those folks will then be less likely to order from restaurants, and, in turn, those businesses will make less money.
“Not only do price controls violate the US and New York Constitutions, but they will likely harm the very restaurants the city purports to support,” a spokesperson for DoorDash told us.
“In addition, price controls can lead to higher prices for consumers, which can reduce orders and earnings for Dashers. Imposing permanent price controls is an unprecedented and dangerous overreach by the government and will limit the options small businesses rely on to compete in an increasingly competitive market."
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“Grubhub has worked hard during the pandemic to support restaurants in New York City and across the country,” a Grubhub spokesperson told us.
“Despite our best efforts, the city council recently passed an unprecedented and unconstitutional price control targeting the food delivery industry. Price controls increase delivery fees for consumers, and therefore lead to a reduction of orders for both restaurants and couriers. While Grubhub remains willing to engage with the city council, we unfortunately are left with no choice but to take legal action."
A similar bill was passed in San Francisco, and the companies also sued that city in federal court in July, according to SF Chronicle. Mayor London Breed indicated she didn't want to sign off on the law, and it passed without her signature.
Uber, New York City Council, and Mayor de Blasio’s office were not immediately available for comment. ®