Food Delivery Apps Sue New York Over Fee Limits

Food Delivery Apps Sue New York Over Fee Limits
Grubhub, Uber Eats and Door Dash have characterized a 15 percent cap on fees charged to restaurants as an unconstitutional measure that will hurt consumers.

The three largest food delivery platforms have filed a lawsuit seeking to overturn New York City’s cap on how much they can charge in fees from restaurants.

The lawsuit, filed by Grubhub, DoorDash, and Uber Eats in Federal District Court in Manhattan on Thursday, was the latest confrontation in an extended battle that began nearly two years ago, when the City Council first discussed a possible cap.

The Council held hearings where restaurant owners complained of paying fees as high as 30 percent, saying that fees were levied even on calls that did not result in orders.

No action was taken until the coronavirus struck New York, forcing many restaurants across the city to close their dining rooms and making the delivery the only option for survival. Saying that it wanted to send restaurants a lifeline, the City Council temporarily capped the fees that food delivery apps could charge, setting them at 15 percent for online orders and 5 percent per order for other fees such as marketing.

In August, the City Council voted to make the caps permanent, drawing opposition from the app platforms that has led to the lawsuit, which also seeks an injunction to remove the caps until a trial can be held.

“This now-indefinite legislation bears no relationship to any public health emergency, and qualifies as nothing more than unconstitutional, harmful, and unnecessary government overreach that should be struck down,” the companies said in their lawsuit.

The companies charge that the city’s law “interferes with freely negotiated contracts” between the apps and restaurants by “changing and dictating the economic terms” of the industry, calling it an “unconstitutional” action that will ultimately lead to higher prices for consumers and less profit for restaurants.

“Price controls increase delivery fees for consumers, and therefore lead to a reduction of orders for both restaurants and couriers,” Katie Norris, director of corporate communications for Grubhub, said in a statement. “While Grubhub remains willing to engage with the City Council, we, unfortunately, are left with no choice but to take legal action.”

Mark Gjonaj, the chairman of the Council’s small business committee and a sponsor of the legislation, said in a statement that the law sought to “bring fairness to a system that all too often lacks it.”