As efforts to regulate grocery delivery apps have risen along with demand for their services, some of the largest companies in the industry have been embroiled in new legal disputes.
and GrubHub, which is owned by the Dutch company Just Eat Takeaway.com
sued San Francisco in July and New York this month for introducing a permanent 15% cap on how much companies can charge restaurants in delivery fees. by Uber Technologies Inc
Uber Eats, also known as Porter LLC, joined the New York lawsuit. DoorDash also sued New York City last week over its new requirement that the company share customer information with restaurants. And Chicago beat DoorDash and Grubhub in August with a lawsuit, accusing them of fraudulent and predatory practices.
The legal skirmishes come as a delivery – with the help of a deadly pandemic – has become more popular and in some cases indispensable. When COVID-19 resulted in lockdowns and restaurant closings, delivery became a lifeline for both restaurants and their diners. But as they tried to help battered restaurants stay afloat, communities across the country capped DoorDash and other platforms on emergency delivery fees, some of which are now permanent. In their lawsuit against New York, DoorDash, GrubHub and Uber Eats say it is unconstitutional, exaggerated and "sets a dangerous precedent."
"The regulation is unconstitutional because it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic conditions of a dynamic industry," said the companies' lawsuit against New York. The lawsuits also allege that the caps are detrimental to consumers, who have already been paid increased costs, and to couriers, whose money-making ability is compromised.
"I think DoorDash's tactic of pitting restaurants against Dasher is wrong and unfair for both Dasher and restaurants," said Jon Wong, a DoorDash employee in the San Francisco Bay Area. "Restaurants shouldn't be hit with high fees while struggling to survive, and dashers shouldn't rely on tips for a decent income."
Laurie Thomas, executive director of the Golden Gate Restaurant Association in San Francisco, said the association was working with local officials on changes to the permanent fee cap that was decided in July. This included things like additional marketing and processing fees that companies could charge restaurants. "With the filing of the lawsuit [DoorDash and Grubhub] all notices of further changes were suspended," she said.
Andrew Rigie, executive director of the New York City Hospitality Alliance, said the laws passed by his city and others "create a fair and equitable marketplace," which can also help open the market to other third-party providers. The big delivery platforms like DoorDash, Uber Eats, and Grubhub – which charge roughly 30% delivery fees – will "try to overcome anything sensible … any sensible regulations that get in their way," he added.
See: Chicago is suing DoorDash and Grubhub over fraudulent charges and predatory practices
DoorDash and Grubhub said Friday they were forced to take legal action, while Uber didn't return a request for comment.
When asked about the company's lawsuit against New York City, a Grubhub spokesman said: "While Grubhub remains ready to work with the city council, we unfortunately have no choice but to take legal action."
"The harmful, unnecessary and unconstitutional permanent price controls in New York City and San Francisco left us no choice but to resolve this matter in court," said a DoorDash spokesman, pointing out that the company had announced its price increases The response to fee caps has resulted in lower orders in some markets.
Companies protect increasingly lucrative businesses.
DoorDash, the US market leader, saw more orders than ever in the second quarter, but forecast a weaker third quarter. Additionally, the San Francisco-based company's shares closed at a record high on Thursday after an analyst upgraded its rating, citing DoorDash's increasing success in delivering outside of restaurants. The stock rose higher on Friday, closing more than 27% higher at $ 222.91, another record.
Also in the second quarter: Uber Eats continued to outperform Uber's ride, even though Uber's ride volume had nearly normalized in some markets, the company said.
In August, DoorDash had 57% of the food delivery market share, according to Bloomberg Second Measure. Ubers Uber Eats and Postmates were next up at 26% combined, while Grubhub had 16%.
Tom White, Analyst at D.A. Davidson said he expected online grocery delivery to continue to face possible increased regulation, although he said, "I don't think any of these battles pose an existential threat to the industry." Since the battles "market for market and city for city" take place, I see them more as fully addressable market-limiting threats. "