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In this April 21, 2021 file photo, a delivery guy rides a bike with a bag of food from Grubhub in New York City. (AP Photo / Mark Lennihan, file)
Three of the nation’s largest food delivery companies are suing New York over a fee limit it put in place during the pandemic to protect restaurants devastated by the forced closure of their dining rooms.
The city has continued to expand those caps even as vaccinations allow more dining indoors, which companies say cost them millions of dollars over the summer.
In the lawsuit filed Thursday night, the United States District Court for the Southern District of New York, DoorDash, Grubhub and Uber Eats called the government fee caps excessive. The companies say they have “helped keep restaurants afloat and the jobs of food industry workers” after investing millions of dollars in relief for these companies.
They are filing an injunction that would prevent the city from applying an extension to the fee caps adopted in August.
The companies are seeking unspecified monetary damages as well as a jury trial.
New York Legal Department spokesman Nicholas Paolucci said in an email that the city’s initiative was legally sound and would be defended in court.
New York City first passed price caps in May 2020 in response to the pandemic, limiting the rate at which third-party platforms could charge restaurants to 15% of an online order for delivery services and at 5% for all other services, including marketing.
Last month, the New York City Council passed a handful of bills it said would help small restaurants, such as banning certain third-party delivery service charges and requiring their phone numbers to be listed on these sites. delivery.
He also put forward an extension of fee caps that would not expire until at least the beginning of next year.
Food delivery services, Grubhub, DoorDash and Uber Eats among them, which have seen explosive growth during the pandemic, are increasingly clashing with local governments who say restaurants and consumers are being hit by sky-high fees and high costs.
Chicago officials last month accused DoorDash and Grubhub of harming the city’s restaurants and their customers by charging high fees and other deceptive practices. Delivery companies have already been the target of legal authorities in other cities and states, but these efforts have targeted specific policies in relation to Chicago’s attack on many elements of the companies’ operations. The companies have called the Chicago lawsuits baseless.
The San Francisco prosecutor accused the delivery companies of breaking California law by classifying the drivers as contractors. And Washington, DC, struck a deal with DoorDash in 2019 after alleging the company misled customers about the amount of tips the drivers received.
In July, the Massachusetts attorney general’s office filed a lawsuit accusing Grubhub of charging restaurants illegally high fees during the pandemic. The state had capped fees for much of 2020.
In the lawsuit filed Thursday night, Grubhub, DoorDash and Uber Eats argue that New York City has continually pushed back the expiration date of price caps and that there is no longer a date, making them permanent. They also claim that the law cost them “hundreds of millions of dollars” until July.
“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.
Food delivery companies, despite skyrocketing revenues, have had mixed economic results even as they were turned into an essential service during the pandemic.
Orders processed by DoorDash reached unprecedented levels in its most recent quarter, and as revenue growth has slowed from the height of the pandemic, the company said last month that sales were still up 83 %, to $ 1.24 billion.
Still, the company lost $ 102 million. Start-ups need to invest significant sums to grow and delivery start-ups say it has worsened as they are forced to spend more to attract new drivers as infections rise. DoorDash said fee caps cost it $ 26 million in the last three-month benchmark period.
In a statement prepared on Friday, DoorDash said the fee cap can lead to higher prices for customers and hurt drivers if the price hike cuts orders overall.
“Imposing permanent price controls is an unprecedented and dangerous overshoot on the part of the government and will limit the options on which small businesses can rely to compete in an increasingly competitive market,” the company said.
DoorDash has already filed a complaint to block a fee cap put in place by San Francisco.
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