Tech

Uber Eats, Grubhub, and DoorDash are suing NYC for capping the fees they can charge restaurants

  • DoorDash, Grubhub, and Uber Eats sued New York City for capping fees they can charge restaurants.
  • In August, the city made permanent a 15% cap for delivery fees and 5% for marketing fees.
  • The apps said this could force them to charge customers more, and could reduce earnings for drivers.

DoorDash, Grubhub, and

Uber Eats
have sued New York City over legislation that limits the fees delivery apps can charge restaurants for their services.

The companies filed the suit in federal court on Thursday, and sought an injunction that would prevent the city from enforcing the legislation, alongside unspecified monetary damages, The Wall Street Journal first reported.

The companies said that the cap on commissions could force them to raise prices for customers, and could reduce earnings for delivery drivers.

Last May, after the pandemic forced restaurants to close their dining rooms, the city passed temporary caps on how much third-party delivery apps could charge restaurants. The apps were only able to charge up to 15% per order for delivery fees and up to 5% for marketing contributions and other related fees.

Last month, the city voted to make this permanent, adding a 3% cap on transaction fees.

In the lawsuit, the companies said that “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.”

They added that food-delivery apps had been “instrumental in keeping restaurants afloat and food industry workers employed” during the pandemic.

Between them, the companies also own Caviar, Seamless, and

Postmates
.

The companies said that they may have to offset the cap by charging higher delivery fees directly to customers. The firms said this would reduce how often customers would order.

“Those permanent price controls will harm not only plaintiffs, but also the revitalization of the very local restaurants that the City claims to serve,” the companies added.

The lawsuit cited an unnamed delivery courier who said that the cap “means less earnings for people like me.”

“A commission cap could also mean delivery services get more expensive for the customers I deliver to, which ultimately means less orders for me,” the courier added, per the suit.

In the lawsuit, the food-delivery companies said that the city could help restaurants in other ways, such as tax breaks or grants. They also accused the city of targeting third-party delivery services, rather than credit-card processors and food suppliers, because of “naked animosity.”

The plaintiffs added that restaurants could avoid high third-party delivery service commissions by helping with deliveries or choosing providers that charged a flat fee per delivery, instead of a commission.

Though third-party fees can be expensive, restaurants say that these platforms can attract new customers who might not normally order from, or even be aware of, the restaurants.

In June, San Francisco also made permanent a temporary 15% cap it placed on third-party delivery services. Grubhub and Doordash have sued that city, too.

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