The cash-strapped restaurant industry in New York City amid the COVID-19 pandemic has been forced to deal with high fee delivery app services in violation of anti-trust laws, according to a class action complaint filed in federal court on Monday.
Three New York delivery app customers sued Grubhub, DoorDash, Postmates and Uber Eats, alleging the companies charge restaurants "exorbitant" fees and have violated anti-trust laws, according to the lawsuit.
The suit also alleges the apps require restaurants to agree to a clause that prevents restaurants from charging different prices to meal delivery customers than dine-in customers, despite higher fees to use the delivery services. Fees range from 13.5 to 40 percent of revenues, whereas restaurants' profits range from 3 to 9 percent of revenues, the lawsuit says.
"The rise of the four [apps] has come at a great cost to American society," the lawsuit, filed in the Southern District of New York, reads.
With restaurants and bars forced to transition to takeout or delivery only, or otherwise close their doors, the pandemic has exacerbated what businesses already put up with from the delivery services, according to the lawyer who filed the complaint.
"The pandemic has made what's been going on for four [or] five years much worse," anti-trust lawyer who filed the lawsuit Gregory Frank told Gothamist. "This has demonstrated that the defendants fees are illegally high and unsustainable because now that there is only the delivery market, the restaurants are losing money."
The lawsuit says the delivery apps "offer restaurant's a devil's choice: in exchange for permission to participate in [their 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 [their] platforms."
"Unable to offer consumers the increased choice of paying better prices to dine-in, restaurants have seen precious dine-in customers slip away year after year," according to the lawsuit. The "fees are shocking when one considers" that the apps "merely offer a list of local restaurants that can be easily found on Google or Yelp for free."
Restaurants across the board have shuttered, laying off thousands of workers as New York's stay-at-home policy, PAUSE, continues. Local business owners say recent closures of Chinese takeout spots can be attributed to supply chain issues and staffing shortages. Even before the coronavirus was confirmed in New York City, Chinese restaurants were struggling.
Delivery apps have said various fees would be suspended, but often temporary and not for all businesses.
Grubhub said it would provide a $100 million relief program by suspending commissions elections in mid-March to help restaurants, but only for marketing commission fees for qualifying businesses.
DoorDash, which owns Caviar, said restaurants that signup with the two delivery services before the end of April would get 30 days of commissions payments waived. Current restaurant partners can have fees waived for pickup orders.
Uber Eats is also waiving delivery fees for 100,000 restaurants in the U.S. and Canada, although it is unclear which businesses qualify and if that waiver is temporary or not.
Postmates says it will "temporarily waive commission fees" in some parts of the country—but not New York.
Grubhub, which began a merger with Seamless in 2013, declined to comment on the lawsuit. The other companies did not respond to requests for comment.