Food Delivery Apps Sues NY for Exceeding Fee Limits


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

The lawsuit, filed Thursday in Federal District Court in Manhattan by Grubhub, DoorDash, and Uber Eats, was the final encounter in a long war nearly two years ago when the City Council first discussed a possible containment.

The council held hearings in which restaurant owners complained about paying fees of up to 30 percent and said they were charged even for such calls. did not result in orders.

No action was taken until the coronavirus hit New York, with many restaurants across the city closing their dining rooms, making delivery the only option for survival. The City Council said that it wanted to send life buoys to restaurants. temporarily limited fees It sets them at 15 percent for online orders and 5 percent per order for other fees, such as marketing, that food delivery apps can charge.

In August, City Council voted to make the caps permanent, attracting opposition from the app platforms that led to the lawsuit, which prompted a court order to have the caps removed until a lawsuit is filed.

“This law, which is now indefinite, has nothing to do with any public health emergency and is nothing more than unconstitutional, harmful, and unnecessary overreach that should be removed by the government,” the companies said in their lawsuit.

The companies argue that the city law “interferes with freely negotiated contracts” between apps and restaurants by “changing and dictating the economic terms” of the industry, calling this an “unconstitutional” act, ultimately leading to higher prices and lower prices for consumers. is doing. profit for restaurants.

“Price controls increase delivery charges for consumers and therefore lead to reduced orders for both restaurants and couriers,” said Katie Norris, corporate communications director at Grubhub. “While Grubhub is willing to engage with City Council, unfortunately we are left with no choice but to take legal action.”

Mark Gjonaj, chairman of the council’s small business committee and one of the law’s sponsors, said in a statement that the law aims to “bring justice to a system that is often lacking”.

City Council spokeswoman Kate Lucadamo said the body would fight the case.

“Restaurants are not just a critical part of New York City’s economy, they’re part of our culture and lifestyle,” said Ms. Lucadamo. “The Council could not allow third-party distribution apps to continue their predatory practices unchecked.”

The lawsuit came amid increased use of third-party distribution apps during the pandemic, even as efforts to regulate apps have also increased.

San Francisco voted to make a 15 percent cap on wages permanent, but Mayor London Breed refused to sign, saying that a permanent upper limit “exceeds what is necessary in the public interest”. Chicago recently sued food delivery apps to charge restaurants and customers high fees and deceptive practices.

The argument from food delivery apps is the idea that restaurants don’t have to deal with them. City Council does not regulate fees from other marketers that restaurants can use, such as Google, Yelp, or online reservation apps. Fee ceilings chosen by the City Council are also arbitrary and litigation fees are not supported by economic impact studies.

Grubhub, DoorDash, and Uber Eats have argued that third-party delivery apps allow restaurants to leverage a huge customer base the apps have spent millions of dollars developing.

Andrew Rigie, chief executive of the New York City Hospitality Alliance, called the three companies’ allegations disingenuous. Many restaurant owners feel they have no choice but to subscribe to one of the third-party delivery app platforms or stay behind in a competitive market where customers now rely on apps for food deliveries.

Some of the third-party delivery companies have also participated in practices such as placing menus of restaurants they are not affiliated with in their apps. buy internet domain names for restaurants.

“This is all part of a very complex approach that billion-dollar companies use to channel consumer purchases through their channels so they can control the market,” said Mr Rigie. “Restaurants think they can’t afford to be on the platform, but they can’t afford not to be on the platform.”

Companies like Grubhub are starting to face investor scrutiny for some of these apps, and revised them. But these changes weren’t enough for the City Council, which is expected to vote this month on a bill to regulate how food delivery services are regulated. treat your workers.

Bills with strong support from council members will require apps to allow their employees to set route options and distance limits; initiate a study on working conditions that will determine minimum payments per trip for workers; asking restaurants and apps to explain their tipping policies; and requires restaurants to provide delivery workers with access to bathrooms.

“During the pandemic, we learned that this is a necessary workforce,” said Carlos Menchaca, a Brooklyn councilor and one of the sponsors of legislation that would set wage standards for delivery workers. “We won’t stop because they won’t stop mining incredible money and profits.”



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