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Mark Mahaney, senior managing director of Evercore ISI, on tech stocks like Uber and Spotify.
DoorDash Inc., DASH 3.39% Grubhub Inc. and UBER 0.70% Eats division of Uber Technologies Inc. are suing New York City over its law permanently capping the amount of commissions that apps can charging restaurants for using their services, the latest move in a growing conflict between platforms and local regulators.
The three largest food delivery companies filed a lawsuit in New York federal court on Thursday evening, claiming the fee cap is damaging and constitutes government abuse. The fee cap cost businesses a combined hundreds of millions of dollars through July, they said in the lawsuit.
A permanent cap will likely force them to rewrite contracts with restaurants, cut marketing in the city and increase fees for consumers, the companies said in the complaint.
The companies are seeking an injunction that would bar New York from enforcing the cost cap order passed last month, unspecified damages and a jury trial.
New York City officials did not immediately respond to a request for comment.
Companies are suing New York City amid scrutiny by local regulators across the United States after the Covid-19 pandemic fueled a broad shift by consumers to platforms. Many restaurants adopted app delivery to stay afloat last year, and some cities have instituted fee guidelines to help them survive.
Food delivery companies say they seek to prove the illegitimacy of the caps more broadly, alleging they are unconstitutional and interfere with negotiated contracts. They are also questioning the cap on marketing services charged by apps, while the city does not for other online platforms that provide advertising to businesses.
GRUBHUB, DOORDASH TRACKED RESTAURANTS, CUSTOMERS, ESPECIALLY DURING COVID-19, CHICAGO SAYS IN COSTUMES
“Left unchecked, the ordinance sets a dangerous precedent,” the companies said in the complaint.
Now that restaurants can operate their dining rooms again, the New York City ordinance “is unrelated to a public health emergency,” the companies said. It also “interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic conditions under which a vibrant industry operates,” they said.
Apps can charge restaurant commissions of up to 30% per order. During the health crisis, New York City temporarily banned food delivery companies from charging restaurants more than 15% per delivery order and more than 5% for marketing and other non-delivery charges. Dozens of other cities have also adopted caps as a measure to try to help restaurants that have been forced to close their dining rooms during the pandemic.
Many of those caps expired as coronavirus cases declined earlier this year, but some lawmakers have sought to extend them given complaints about the charges as a whole.
San Francisco’s supervisory board passed a permanent cap of 15% per order on food delivery charges in June, the first city to institute a cap with no end date. The applications have also lodged a complaint there.
Apps say they must have passed the costs on to consumers when restaurant fees are limited, and the companies say in the lawsuit that the trend will likely continue in New York with a fixed cap.
Cities scrutinize businesses for other reasons as well. Last month, Chicago filed two lawsuits in state court against Grubhub and DoorDash, alleging that the companies were not transparent with the fees charged to customers for delivery, used deceptive advertising and added restaurants to their stores. platforms without consent.
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The city is seeking to ensure that businesses obey its laws, with restitution for consumers and restaurants and with civil fines ranging from $ 500 to $ 10,000 per violation.
Grubhub and DoorDash said the allegations were false and that they planned to fight the lawsuits.
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