New York City’s attempt to stipulate how much food delivery companies can take from restaurants is facing a lawsuit from three of the biggest US food delivery outfits – DoorDash, Uber Eats, and Grubhub.
It has added to the culminating disputes between US states and gig economy companies hanging largely on workers welfare.
In May 2020, the city temporarily ordered food delivery apps to charge restaurants no more than about 20 per cent of each order total to deliver takeout – 15 per cent for the actual deliveries, five per cent for being listed in the app, plus payment processing fees. The city’s order was set to end in 90 days though it was later extended until February 2022, The Register reports.
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A bill passed by the city in August this year, however, proposed making this cap permanent. It has yet to be signed into effect by Mayor Bill de Blasio. Now, in an attempt to block the bill, all three tech companies jointly filed a lawsuit against New York City in federal court on Thursday. The trio are seeking an injunction to stop the proposal from being passed.
New York City councilors believe the bill better supports restaurants and their patrons. But DoorDash, Uber Eats, and Grubhub believe it is unconstitutional and will harm businesses and their customers.
“The ordinance is unconstitutional because, among other things, it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates,” according to the complaint.
Representatives from Grubhub and DoorDash told The Register the bill may lead to an increase in delivery fees for customers, making the whole experience more expensive for hungry New Yorkers.
Don’t forget: these app companies charge the restaurant and the customer for each order, so if the delivery giants can’t make the eateries pay more, the punters will have to cough up the difference. Those folks will then be less likely to order from restaurants, and, in turn, those businesses will make less money.
“Not only do price controls violate the US and New York Constitutions, but they will likely harm the very restaurants the city purports to support,” a spokesperson for DoorDash told The Register.
“In addition, price controls can lead to higher prices for consumers, which can reduce orders and earnings for Dashers. Imposing permanent price controls is an unprecedented and dangerous overreach by the government and will limit the options small businesses rely on to compete in an increasingly competitive market.”
“Grubhub has worked hard during the pandemic to support restaurants in New York City and across the country.
“Despite our best efforts, the city council recently passed an unprecedented and unconstitutional price control targeting the food delivery industry. Price controls increase delivery fees for consumers, and therefore lead to a reduction of orders for both restaurants and couriers. While Grubhub remains willing to engage with the city council, we unfortunately are left with no choice but to take legal action,” a Grubhub spokesperson told The Register.
A similar bill was passed in San Francisco, and the companies also sued that city in federal court in July, according to SF Chronicle. Mayor London Breed indicated she didn’t want to sign off on the law, and it passed without her signature.
US states are increasingly getting involved in how app-based businesses using the gig model treat their workers and now, other parties involved in their business. The state of California set the pace with its AB5 legislation that mandated ride-hailing app operators in the state to recognize drivers as employees.
It appears, other states are being inspired by that to tackle what they see as unjust treatment of parties involved with gig economy firms. However, there is always a solid line of defense from the firms based on the argument that the sustainability of their business is at stake – and that is usually left for the court to decide.