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Last year, New York City began restricting what third-party platforms can charge for delivery services to help restaurants deal with pandemic restrictions. Under the rules, platforms can charge restaurants 15% of a given order for delivery, plus an additional 5% for non-credit card fees like marketing which are also added. The city council voted in late August to make the limitations permanent.
by Dash (HYPHEN), who owns Caviar; Grubhub (WORM), owner of Seamless; and Portier LLC, the Uber (UBER) subsidiary that operates Uber Eats and Postmates, filed the lawsuit Thursday in federal court in the Southern District of New York. In addition to damages, they are seeking an injunction against the city preventing it from applying the rule.
“The ordinance is unconstitutional because, among other things, it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic conditions under which a vibrant industry operates,” the lawsuit said.
A permanent cap likely means they will have to renegotiate or end contracts with restaurants and cut some services, the plaintiffs said in the lawsuit. It would also likely mean higher fees for people ordering delivery, they warned in the lawsuit.
“Left unchecked, the ordinance sets a dangerous precedent,” they wrote in the lawsuit.
“The initiative is legally sound and we will defend it in court,” the city’s legal department told CNN Business in response to a request for comment on the lawsuit.
Supporters of making the fee caps permanent said they were key to ensuring the survival of restaurants in the city, which have been hit hard by the pandemic. “By limiting, without expiration, the fees charged to restaurants by third-party food delivery services, we are ensuring that mom-and-pop stores have a real opportunity to recover and thrive,” said Francisco Moya, Member. of the New York council, in a statement. August.
Restaurants have a complicated relationship with third-party delivery providers. Commission charges place a heavy burden on restaurants, which operate with low margins at the best of times.
Some restaurants told CNN Business late last year that the high fees even put them in the red on delivery orders. But they also said at the time that they felt the cost of avoiding those platforms was even higher – if customers can’t find them on one delivery app, they might as well order in another. restaurant instead.
At the start of the pandemic, when restaurants had to completely shut down their dining rooms or limit capacity, lawmakers across the country began to cap delivery costs to ease the financial burden on restaurants, which relied heavily on delivery. to make ends meet.
New York is not the only city to have decided to perpetuate its cap. San Francisco made a similar move this summer. DoorDash and Grubhub filed a lawsuit against San Francisco in July. John Cote, director of communications for the city’s attorney’s office, told the San Francisco Chronicle at the time of filing that they “will review the case once we are served, and we will take it to court.” The case is ongoing.
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