A collection of some of the major food delivery service providers in the US is launching a lawsuit against New York City over new laws that limit the fee a delivery service can charge to a restaurant. The suit was filed on Thursday in Federal court and is designed to prevent the city from enforcing the new laws.
The suit is also seeking unspecified damages from New York City as a result of the new law. The three companies which include UberEats, DoorDash, and GrubHub say that the limits will significantly limit their margins, something that may force them to raise prices on end consumers.
The city of New York decided to pass temporary caps on the amount of money that delivery apps can charge in May last year during the height of the COVID-19 pandemic. The move was designed to provide a cushion for the restaurant industry that had been hit hard by the pandemic.
According to the new laws, third-party delivery apps could only charge up to 15% of the total order for fees. The laws also put a cap of 5% on all marketing contributions and related fees. Although these laws were meant to be temporary to help restaurants go through the troubles of the pandemic, New York City decided to vote last month to make the caps permanent.
The vote last month also added another 3% cap on transaction fees. The move now appears to have rattled the feathers of these delivery apps. In the lawsuit, the three companies claim that since the pandemic seems to be wearing off, there is no reason to have such laws in place right now. The three companies also call the new law nothing more than unconstitutional, harmful, and unnecessary government overreach.
The lawsuit argues that during the pandemic months, food delivery apps were crucial in helping restaurants stay afloat. They argue that the price controls imposed by New York City will only harm the recovery of the restaurant industry and lead to loss of jobs. But more importantly, a delivery fee cap would also mean that the apps will have no choice but to pass on additional costs to the consumer.
As a result, the three companies feel that the new law is simply counterproductive and is not in the best interest of the public. Food delivery apps have become integral in the restaurant business. Even though the use of these apps went over the roof during pandemic lockdowns, it has always been clear that restaurants benefit a lot from third-party delivery apps.
For instance, the apps have helped market and promote restaurants to the broader consumer through their services. But despite this, it is clear that most authorities in various cities are not looking back as far as these caps go. New York is not the only major city to impose them. The same was done in San Francisco and DoorDash and GrubHub have already sued the city on the same.