Food delivery services GrubHub, DoorDash, Postmates, and Uber Eats are being sued in a class action lawsuit for levying heavy commission fees on restaurants that leave customers paying higher prices, including during the coronavirus pandemic.
The lawsuit, filed Monday in Manhattan federal court by three New York customers, accuses the companies of exploiting their dominance in the food delivery industry by imposing ‘exorbitant’ commission fees.
The customers argued that the defendants violated US antitrust laws by forcing restaurants to charge delivery and dine-in customers the same price.
The lawsuit raises how these third party services have imposed high commission fee charges on restaurants – which they allege range between 10 percent to 40 percent of each order.
The lawsuit claims these companies, including Seamless which is owned by Grubhub and Caviar which is owned by Doordash, put restaurants in a difficult position with commission.
As a result, restaurants are forced to make the ‘devil’s choice’ and charge customers more to make up for those costs.
Before the coronavirus crisis the spike in prices made it hard for restaurants to keep their tables full. Now with the pandemic, it only adds to the strain restaurants face as they’re forced to make only pick-up and delivery meals.
The lawsuit notes restaurants have no choice but to comply with the excessive fees because the delivery companies dominate the market.
‘For example, in New York City … Grubhub has a whopping 66 percent market share of the meal delivery market,’ the complaint says.
The suit seeks triple damages, including for overcharges since April 14, 2016 for dine-in and delivery customers in the US at restaurants using the defendant’s delivery apps.
‘Plaintiffs bring this claim for relief on behalf of all Americans who would still [like] to enjoy a nice dinner out with their family before defendants make that impossible,’ the complaint said as per CNBC.
‘Their fees are outrageous,’ Mariam Davitashvili, a plaintiff in the suit who lives in Brooklyn, said to the New York Post, adding she believes she shouldn’t be ‘paying more for my food’ to protect these apps.
In light of the coronavirus crisis, some apps like Grubhub promised to suspend commission fees for restaurants, but they’ve come under fire for their fine print contracts that end up deferring fees instead of eliminating them altogether.
But this isn’t a new complaint against these companies.
Similar concerns were raised by New York lawmakers in February when they introduced legislation in the City Council to try to limit delivery company commission fees at 10 percent of each orders. The legislation also calls for companies to be more transparent about how much they charge restaurants to use the service.
Amid the coronavirus crisis the restaurant industry has suffered a major blow as locals are ordered to stay at home.
Now lawmakers and trade groups are calling for Mayor Bill de Blasio to enact an emergency commission fee cap on delivery services to ease the financial burden on restaurants.
The food delivery services are yet to comment on the lawsuit.