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DoorDash, Grubhub and Uber sue NYC over delivery fee limits

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Delivery man riding by a posted sign with safety instructions at Bushwick Avenue. NYPD closed major streets to vehicular traffic in Bushwick during the day allowing people to properly exercise social distancing while walking in the streets during the pandemic.

Erik McGregor | Getty Images

DoorDash, Grubhub and Uber Eats filed a lawsuit against the city of New York Thursday over a new bill passed by City Council that would make emergency delivery fee caps installed during the pandemic permanent.

The lawsuit, filed in federal court in the Southern District of New York, alleges price controls required under the new law “will harm not only Plaintiffs, but also the revitalization of the very local restaurants that the City claims to serve.” The companies claim the law is unconstitutional because “it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates.”

The companies claimed that the selection of a 15% fee cap for delivery services and 5% cap for non-delivery services is arbitrary. They said restaurants have plenty of options available for how to conduct their businesses without using the apps and are not constrained to using their services if they feel prices are too high.

The plaintiffs also said they “compete vigorously” not only with each other, but with online advertising companies like Google and Yelp, which are not subject to the 5% non-delivery fee cap.

Food delivery fee caps spread across cities like New York during the early stages of the coronavirus pandemic, when restaurants were among the hardest-hit by government-mandated closures. They relied heavily on delivery to maintain at least some revenue.

The New York City Council voted in late August to extend those fee caps indefinitely, preventing the platforms from charging what the bill’s sponsors saw as excessively high fees to restaurants.

The delivery platforms are seeking an injunction that would prevent the law from being enforced. They want the court declare the bill to be unconstitutional and are also seeking damages from the city.

The lawsuit follows a similar legal action from DoorDash and Grubhub against San Francisco, which also introduced a permanent 15% delivery fee cap.

Representatives for the Mayor’s office and the bill’s sponsor did not immediately respond to requests for comment.

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