Why delivery apps and cities are suing each other

Cities and food delivery apps are fighting over caps on the fees restaurants pay to use them.


September 20, 2021

DoorDash, Caviar, Grubhub, Seamless, Postmates, and Uber Eats are usually competitors, but they’re pals when it comes to suing NYC over a law meant to help restaurateurs.

The backstory:

In May 2020, New York City Council passed several measures to help restaurants struggling amid the pandemic.

Among them was a temporary cap on 3rd-party app fees.

The new rule:

  • Apps could charge no more than 15% on delivery orders and no more than 5% on marketing or other fees
  • Violators could face up to $1k in fines per day, per restaurant

As restaurants complained that the ~30% fees were too much at a time when customers were only getting takeout or delivery, cities including Los Angeles, DC, and Philadelphia passed similar measures.

But in August, NYC voted to make its cap permanent

The apps argue that the cap is “unconstitutional,” while Grubhub claims it only made 1% of total food sales as profit before the cap and 0% now.

City Council says the cap protects restaurants against “predatory” practices.

But wait, there’s more:

  • Grubhub and DoorDash are also suing San Francisco over its decision to make a 15% delivery cap permanent.
  • The city of Chicago is suing Grubhub and DoorDash, accusing the platforms of deceiving customers, drivers, and restaurants.
  • Last year, DoorDash agreed to pay $2.5m to settle a DC suit alleging that it misled customers about how much of their tips went to drivers.

So, what’s a diner to do? Experts say the best way to support your local faves is to order from them directly.

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