Food delivery apps to sue NYC over commission caps
- ByStartupStory | September 11, 2021
Food delivery apps, DoorDash Inc, Grubhub Inc, and Uber Eats have joined together to sue New York City over a law that would permanently limit the number of commissions the apps can charge restaurants to use their services.
The companies say the 15% cap interferes with their right to freely negotiate contracts and will likely result in higher prices for consumers and lower earnings for restaurants and delivery drivers.
The companies filed the suit in federal court in New York late Thursday, contending that the fee cap is harmful and constitutes government overreach. The limit on fees has cost the companies hundreds of millions of dollars combined through July, they said in the suit. The companies are looking for a directive that would prevent New York from enforcing the fee-cap edict adopted last month, as well as unspecified monetary damages and a jury trial.
The companies also argue that if the city wants to improve the profitability of local restaurants, it could provide tax breaks or grants out of its own pocket instead of hurting the commissions of the delivery services.
This legislation also comes amid increasing scrutiny over app-based delivery companies that have a reputation for harming both restaurants and gig workers to keep costs low for consumers.
As with the temporary law, any violators of the permanent cap would face up to $1,000 per day in fines per restaurant. The companies said the new law would not only cause them to have to rewrite their contracts with restaurants, but also raise fees for consumers and hurt delivery workers’ ability to make money.
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