Grubhub, DoorDash, Uber Eats sue NYC over restaurant fee caps

Grubhub, DoorDash and Uber Eats sued New York City late Thursday evening over the city’s new law that places a permanent cap on commissions third-party food delivery companies can charge restaurants.

The three largest food-delivery companies filed the suit in federal court in New York, arguing that the law is harmful and an unconstitutional act of government overreach.

The cap, which limits the amount that the apps can charge restaurants to 15 percent of food orders for delivery services, has cost the companies hundreds of millions of dollars combined through July, the suit argued.

The new bill, if signed by Mayor Bill de Blasio, would indefinitely extend the temporary cap that was first implemented in June 2020 in order to help restaurants weather the pandemic after many restaurants complained apps were charging fees as high as 30 percent. 

The lawsuit says that the 15 percent cap on fees was “randomly selected” and said the “city made no effort to study the economic impact and sustainability of the cap” on fees.

In addition to the 15 percent cap on food orders, the proposed permanent extension includes a 5 percent fee for advertising and other miscellaneous services and 3 percent for credit card processing fees. 

The companies are seeking an injunction that would prevent enforcement of the ordinance, unspecified monetary damages against the city and a jury trial.

City Councilman Mark Gjonaj, chairman of the city’s Small Business Committee, called the lawsuit “a misguided effort to protect what they feel is their right to fleece local mom-and-pop eateries out of every dime that they can squeeze from them. It’s unfortunate but not surprising.”

“Let me be clear, none of the reform measures are meant to target or impede any business from providing a service or making a profit,” he said in a statement. “The laws simply seek to bring fairness to a system that all too often lacks it.”

The lawsuit comes as the companies face heightened scrutiny of such fees in several other cities around the country.

The companies suggested as much in their complaint Thursday, saying, “Left unchecked, the ordinance sets a dangerous precedent.”

At the outset of the pandemic, many restaurants turned to third-party delivery services as a crucial lifeline amid mandates that closed dining rooms.

Some cities, including New York and San Francisco, rolled out temporary limits on fees, and now they’re weighing whether to make those limits permanent.

DoorDash and Grubhub have filed a similar lawsuit against San Francisco, which made their limits on fees permanent back in June.

The apps say such limits on fees force them to pass those costs on to consumers.