Uber Eats, DoorDash, Grubhub Sue New York City Over Legislation on Commission Caps

The suit argues that the legislation is unconstitutional because "it interferes with freely negotiated contracts between platforms and restaurants.”

By Reuters | Updated: 11 September 2021 11:34 IST

Uber Eats, DoorDash, Grubhub Sue New York City Over Legislation on Commission Caps

Highlights

New legislation limits the amount that food-delivery companies can charge
New legislature requires operating licenses that is valid for two years
Food delivery companies argue that the legislation is unconstitutional

Food-delivery companies DoorDash Inc, Grubhub Inc and Uber Eats have sued New York City over a legislation to license food-delivery apps and to permanently cap commissions they can charge restaurants.

The three food-delivery companies filed a lawsuit in federal court in New York late on Thursday. The companies are seeking an injunction that would prevent New York from enforcing the fee-cap ordinance adopted last month, as well as unspecified monetary damages and a jury trial.

The New York City Council approved in August legislation that limits the amount that food-delivery companies can charge restaurants to use their platforms and requires them to obtain operating licenses that are valid for two years.

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"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 said in the lawsuit filed on Thursday.

The suit argues that the legislation is unconstitutional because "it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates".

The legislation comes after the city enacted temporary caps on the commissions food delivery companies charged restaurants during the pandemic, when so many of them were forced to close or rely on delivery and carry-out alone.

It seeks to limit the amount those companies can charge restaurants to 15% of food orders for delivery services and 5% for advertising and other non-delivery services.

The New York City restaurant delivery market is split almost evenly among the major platforms, according to Bloomberg Second Measure, which collects payment data from customers.

DoorDash commanded 36% of July sales in the city, Grubhub 34% and Uber Eats and Postmates a joint 30%.

San Francisco has also enacted permanent commission caps on the services.

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