DoorDash, Grubhub and Uber Eats able to sue NYC over food delivery commission cap
Published: 08:38 20 Sep 2023 EDT
Food delivery companies DoorDash Inc (NYSE:DASH), Grubhub, and Uber Eats can sue New York City over a law limiting how much they can charge restaurants for their services, a US judge said on Tuesday.
US District Judge Gregory Woods in Manhattan ruled that the plaintiffs, which also include Caviar, Seamless and Postmates, had adequately alleged that the commission cap violates the US Constitution and New York State Constitution by denying them their right to contract with the restaurants and forcing them to operate in the city at a loss.
He said the city’s goal was "economic protectionism for local 'mom and pop' stores and antagonism toward out-of-state, wealthy third-party platforms,” Reuters reported.
The delivery cap, which was introduced during the pandemic in March 2020 and made permanent in August 2021, aims to help small businesses by limiting restaurants’ third-party delivery commissions to 15% of the total order and all other charges such as advertising to 5%.
However, the three food delivery services argue the cap undermines their contracts with restaurants.
"We are encouraged by this promising decision and remain steadfast that these price controls are harmful to New Yorkers, unnecessary, and unconstitutional," DoorDash said in a statement provided to the media.
"We stand with the New York City customers, merchants, and communities that we serve as we will continue to litigate this matter in court."
Shares of Grubhub owner Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) rose 7.4% in premarket trade, while DoorDash slid 3% and Uber Eats parent Uber Technologies Inc (NYSE:UBER) dipped 0.5%.
Contact the author at [email protected]
Follow her on Twitter @emilyjjarvie
