Last year, New York City began restricting what third-party platforms can charge for delivery services as a way to help restaurants cope with pandemic restrictions. By the rules, platforms can charge restaurants 15% of a particular order for shipping, plus an additional 5% for expenses other than credit card expenses, such as marketing that also faces . The city council voted in late August to make the restrictions permanent.
for Dash (DASH), owner of Caviar; Grubhub (GRUB), owner of Seamless; and Portier LLC, the Uber (UBER) subsidiary that operates Uber Eats and Postmates, filed the lawsuit Thursday in federal court in the southern district of New York. In addition to the damages, they are requesting a court order against the city that prevents compliance with the rule.
“The ordinance is unconstitutional because, among other things, it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates,” the lawsuit said.
A permanent limit means they will have to renegotiate or terminate contracts with restaurants and reduce some services, the plaintiffs complained in the lawsuit. It would probably also mean raising rates for people requesting delivery, they warned in the lawsuit.
“If left unchecked, the ordinance sets a dangerous precedent,” they wrote in the lawsuit.
“The initiative is legally sound and we will defend it in court,” the city’s legal department told CNN Business in response to a request for comment on the lawsuit.
Proponents of the permanence of the tariff limits have said that they are essential to ensure the survival of the city’s restaurants, which have been severely affected by the pandemic. “By limiting, without expiration, the fees charged to restaurants for third-party food delivery services, we ensure that mom and pop stores have a real chance to recover and thrive,” the New York Council member said. , Francisco Moya, in a statement in August.
Restaurants have a complicated relationship with external distribution providers. Commission fees are a heavy burden for restaurants, which operate on thin margins at the best of times.
Some restaurants told CNN Business late last year that high rates have even blacked them out on delivery orders. But they also said at the time that they consider the cost of avoiding these platforms to be even higher; if customers can’t find them in a delivery app, they could also order from a different restaurant.
At the beginning of the pandemic, when restaurants had to completely close canteens or limit capacity, lawmakers across the country began to limit delivery costs to ease the financial burden on restaurants, which depended heavily on delivery for meet their prices.
New York is not the only city that decided to make its limit permanent. San Francisco made a similar move this summer. DoorDash and Grubhub filed a lawsuit against San Francisco in July. John Cote, the city’s attorney general’s communications director, told the San Francisco Chronicle at the time of the filing that “they would review the lawsuit once we’ve been notified and we’ll deal with it in court.” The case continues.
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