As NYC restaurants struggle amid COVID-19, GrubHub and other delivery services sued over fees

Posted On Tue, April 14, 2020 By

Posted On Tue, April 14, 2020 By In Policy, Restaurants

Photo by Patrick Connor Klopf on Unsplash

A number of food delivery platforms were sued in New York on Monday for charging excess fees and forcing restaurants to raise prices for dine-in customers. Through contracts with restaurants, GrubHub, Uber Eats, Postmates, and DoorDash are able to determine the price of meals, even those ordered directly from the restaurant, according to the lawsuit. On top of that, the companies charge fees that can be high as 40 percent of revenue, eating away from the restaurant’s profits. The legal battle comes as the city’s restaurants struggle to survive during the coronavirus outbreak, with dining rooms temporarily closed and most businesses relying on take-out orders.

According to the class-action lawsuit, the contracts include a no price competition clause that prevents restaurants from lowering prices for customers who order directly from the restaurants, according to the New York Post. “In exchange for permission to participate in defendants’ meal delivery monopolies, restaurants must charge supra-competitive prices to consumers who do not buy their meals through the delivery apps, ultimately driving those consumers to defendants’ platforms,” the lawsuit claims.

The lawsuit is seeking triple damages since April 2016 for dine-in and delivery customers at restaurants using the apps, Reuters reported on Monday.

But to survive during the current crisis, the delivery apps will depend on their restaurant partners. According to GrubHub, business was affected by the coronavirus more in New York City, the epicenter of the pandemic and the company’s biggest market, than in any other metro area. GrubHub says the drop in business can be attributed to residents leaving the city or cooking more at home, as well as the closures of many local restaurants.

The company also said it plans to reinvest profits it expects to generate during the second quarter “into programs that directly drive more business to our restaurant partners.” This could include diner promotions funded by GrubHub, reduced or eliminated delivery fees, and other platform improvements.

But a program launched by the company last month, “Supper for Support,” which provided a $10 discount to diners who ordered at least $30 or more between 5 p.m. and 9 p.m., made restaurants pay for the discount, Eater reported. “We’ll take care of the marketing — you cover the cost of promotions only on the orders you receive,” an email to restaurants obtained by Eater explains.

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