DoorDash, Uber Eats and Grubhub sue NYC over fee caps

Major online food delivery companies DoorDash, Uber Eats, Grubhub, Caviar, Seamless and Postmates are suing New York City over a fee-cap law, which was first introduced last year and made permanent last month, limiting the commission the apps can charge restaurants. 

First reported by the Wall Street Journal, the companies filed the lawsuit on Thursday seeking an injunction that would prevent the enforcement of the legislation.

The legislation bars delivery companies from charging restaurants more than 15% per delivery, more than 5% for listing on apps and 3% for credit-card processing fees.

The companies said that the fee caps have cost them ‘hundreds of millions of dollars’ in July alone. 

“Throughout the COVID-19 pandemic, third-party platforms like Plaintiffs have been instrumental in keeping restaurants afloat and food industry workers employed, including by investing millions of dollars in COVID-relief efforts specifically for local restaurants,” the lawsuit reads. (TechCrunch)

“Yet, the City of New York has taken the extraordinary measure of imposing permanent price controls on a private and highly competitive industry—the facilitation of food ordering and delivery through third-party platforms. Those permanent price controls will harm not only Plaintiffs, but also the revitalization of the very local restaurants that the City claims to serve.”

The companies said that the fee caps are ‘’unconstitutional’ and “bear no relationship to any public-health emergency.” They said they will also hurt customers and delivery workers due to price increases. 

They also said that if NYC wants to help local restaurants, they could do it in other ways such as providing tax breaks. 

“But rather than exercise one of those lawful options, the City chose instead to adopt an irrational law, driven by naked animosity towards third-party platforms,” the companies said.

Many cities in the US introduced similar fee caps during the pandemic. However, most of them expired as restaurants reopened and restrictions were lifted.

Earlier in June, San Francisco enacted its 15% cap becoming the first city to make the limits permanent. The delivery companies also filed a lawsuit there.