DoorDash, Grubhub, and Uber Eats sue New York City over restaurant fee caps
Delivery service platforms DoorDash, Grubhub, and Uber Eats are suing New York City for capping the amounts they can collect in fees from restaurants. In a complaint filed in US District Court court late Thursday, the companies argue that the fee caps are government overreach that will harm businesses. Along with monetary damages and a jury trial, the three companies are seeking an injunction to keep New York from enforcing the fee-capping rule that the city made permanent in August.
The city put a temporary cap on delivery fees last June to help restaurants that were relying on food deliveries to stay in business while they were closed to in-person dining because of pandemic restrictions. The platforms can’t charge restaurants more than 23 percent per order, which breaks down as 15 percent for delivery, 5 percent for having the restaurant listed on its app, and 3 percent for credit card processing feeds.
The delivery platforms have been accused of adding other unclear fees on top of their delivery fees, exceeding the maximum.
New York City Councilman Mark Gjonaj, who chairs the city’s small business committee, said in a statement Thursday that the city council would move ahead with the fee capping regulation. “The laws simply seek to bring fairness to a system that all too often lacks it,” he said.
A spokesperson for Grubhub said in an email to The Verge that the company had “worked hard during the pandemic to support restaurants in New York City and across the country.” But the fee capping would “lead to a reduction of orders for both restaurants and couriers,” according to Grubhub.
Uber didn’t reply to a request for comment. A spokesperson for DoorDash said in a statement emailed to The Verge that the fee cap “will likely harm the very restaurants the City purports to support,” and reduce earnings for its drivers. “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.”
That statement is nearly identical to one DoorDash made in July, as it and Grubhub sued San Francisco to block that city from making permanent a 15 percent cap on order fees. That cap took effect in April 2020 as a temporary measure. The San Francisco board of supervisors voted unanimously in June to make the fee cap permanent. SF Mayor London Breed declined to sign it, however, saying she considered it “unnecessarily prescriptive in limiting the business models of the third-party organizations, and oversteps what is necessary for the public good.”
As the companies argued in San Francisco, New York City’s fee cap is likely to raise prices for consumers, they said in the latest complaint. The lawsuit also questions the city imposing a 5 percent cap on marketing services offered by food-delivery companies, when other “marketing and advertising providers, such as Google, Facebook, or Twitter remain unrestricted.”
Some of those “marketing services” came under scrutiny during the pandemic; a report last June found that Grubhub was buying domain names to set up websites that resembled those of local restaurants — despite having no formal relationship with the business — so it could allegedly charge larger commission fees of up to 20 percent.
And as for the “harm” the fee caps could have on drivers, DoorDash came under intense criticism in 2019 when an investigation found it was using its delivery workers’ tips to pay their wages. It later revamped its tipping system.