Food Delivery Companies Sue New York City Over Price Caps

The companies say they were "instrumental" in keeping restaurants open and call caps on upcharges and other fees government overreach.
Grubhub delivery person
Posted at 12:02 PM, Sep 10, 2021

Three of the nation's largest food delivery companies are suing New York City over a limit on fees it put in place during the pandemic to protect restaurants devastated by the forced closure of their dining rooms.

The city has continued to extend those caps even as vaccinations allow more indoor dining which, according to the companies, cost them millions of dollars over the summer.

In the suit filed late Thursday in the U.S. District Court for the Southern District of New York, DoorDash, Grubhub and Uber Eats call the fee caps government overreach. The companies say they were “instrumental in keeping restaurants afloat and food industry workers employed” after investing millions of dollars in relief for those businesses.

They are filing for an injunction that would prevent the city from enforcing an extension on the fee caps adopted in August.

The companies are seeking unspecified monetary damages as well as a jury trial.

New York Law Department spokesman Nicholas Paolucci said in an email that the city’s initiative is legally sound and will be defended in court.

The city of New York first enacted the price cap in May 2020 in response to the pandemic, limiting the rate third-party platforms could charge restaurants at 15% of an online order for delivery services, and 5% for all other services, including marketing.

Last month, the New York City Council passed a handful of bills it said would help small restaurants, like prohibiting some third-party delivery service charges and mandating that their phone numbers are listed on delivery sites.

It also pushed forward an extension on the fee caps that would not expire until at least early next year.

Food delivery services, Grubhub, DoorDash and Uber Eats among them, that experienced explosive growth during the pandemic are increasingly clashing with local governments who say restaurants and consumers are getting hit with exorbitant fees and high costs.

Last month, Chicago officials accused DoorDash and Grubhub of harming the city’s restaurants and their customers by charging high fees and through other deceptive practices. Delivery companies have been the target of legal authorities in other cities and states before, but those efforts have targeted specific policies compared to Chicago’s attack on numerous elements of the companies’ operations. The companies called Chicago's lawsuits baseless.

San Francisco’s district attorney has accused delivery companies of violating California law by classifying drivers as contractors. And Washington, D.C., reached a settlement with DoorDash in 2019 after alleging the company misled customers about how much drivers received in tips.

Additional reporting by The Associated Press.