Class Action Against Online Delivery Platforms

Even before the coronavirus, third party online delivery platforms were the target of proposed regulation. Some delivery apps, such as DoorDash, Grubhub, Postmates and Uber Eats, take between 10% to as much as 40% of delivery orders. The New York State Liquor Authority last year began formulating proposed limits on those profits. That has not been finalized. And a bill was proposed in the New York City Council earlier this year to limit a delivery platform’s share to 10%, which is still pending. Since the virus outbreak, the City of San Francisco has restricted their revenue share to 10%, and there is pressure on Mayor de Blasio to do the same. Adding to the pressure, on April 13, 2020, three New York residents filed a class action lawsuit in the U.S. District Court in Manhattan (Davitashvili v. Grubhub, Inc.) against four of the largest online meal ordering platforms seeking injunctive relief and damages under federal antitrust laws. The suit alleges that the delivery apps, which have become part of everyday life, force restaurants to charge higher prices for meal delivery items because of the defendant’s massive fees. The agreement restaurants are required to sign with the delivery services controls pricing both for in house dining and delivery, making it impossible for restaurants to compete by providing their own delivery systems. This, the restaurants say, cuts into their already thin profit margins which are at about 2% to 6%, and decreasing. The numbers become even worse as more than half of consumer restaurant spending will be off premises ordering rather than on premises dining. The suit also claims that the delivery apps monopolize the market for delivery workers. With the government ordered shut down of in house dining last month, restaurants are relying almost exclusively on delivery to survive. The third party delivery fees and their anticompetitive effects render restaurant profits negligible, and, the suit claims, “have contributed to demise of American restaurant culture.”