Food Delivery Apps Join Hands To Sue New York City Over Cap On Delivery Fees

Just two weeks after City Council passed a new bill that has capped the fees food delivery apps can charge restaurants; companies like Doordash, Grubhub, and Uber Eats have joined hands to sue New York City. They have filed a lawsuit in Manhattan Federal court seeking to prevent government officials from enforcing such measures. The three companies argued that the decision amount to government overreach and will do more harm to consumers than benefits. These companies had filed a similar lawsuit in July against the city of San Francisco.

The lawsuit came after the city council capped the fees that food delivery companies can charge restaurants. The bill is simply the extension of temporary measures by the council members during the peak of the coronavirus pandemic last spring. The bill made it mandatory for these companies to charge a maximum of 20 percent as the delivery and non-delivery fees. The companies claimed that the fee cap, which was first implemented as a temporary measure during the pandemic, has cost them hundreds of millions of dollars. Uber Eats was quoted as saying in a report that it lost over USD 60 million in the city due to a temporary measure. But this comes at a time when revenue of most of these delivery service providers has increased manifold during the pandemic. For example, the revenue of Doordash increased to USD 1.2 billion in the second quarter of 2021.

“This is completely unconstitutional as it interferes with contracts that are freely negotiated between these platforms and restaurants. This is because the Ordinance dictates terms on which the industry operates,” the lawsuit said. The city had enacted a rule last year that capped the delivery fee to 15 percent and an additional 5 percent other than credit-card fees. The city council voted to make these changes permanent. A permanent cap would require a new contract between these companies and restaurants. As a result, people who will avail of these services would likely end up paying more. However, the city’s law department said that the initiative is legally sound and will be defended in court. Those in the favor of capping the fees are of the view that it is important to ensure the survival of the city’s restaurants that are already stressed because of the pandemic.