In the restaurant industry, 2020 was the year third-party delivery companies took over. DoorDash, Uber Eats and Grubhub haven’t gone away in 2021, but they have faced rising challenges from some cities that want to rein them in with the goal of helping local restaurants.
The companies vowed to fight back, and quickly took the various measures to court. The cases in New York, Chicago and San Francisco are the first of their kind in the food delivery world and could change how the businesses operate going forward.
Here’s a look at the four big legal battles between delivery providers and cities.
DoorDash and Grubhub vs. the City of San Francisco
The background: In June, San Francisco passed a permanent 15% cap on the fees that delivery companies charge restaurants for their services.
Dozens of cities and counties implemented temporary limits to support restaurants during the pandemic, but San Francisco was the first to make its cap permanent. It said the rule would help restaurants stay financially viable.
Less than a month later, DoorDash and Grubhub responded by suing the city over the cap.
The companies said it violates their rights under both the U.S. and state Constitutions by interfering with private contracts between businesses. They also argued that fee caps will ultimately hurt restaurants by forcing delivery providers to charge customers more.
Not surprisingly, the caps in San Francisco and elsewhere have also hurt delivery companies’ bottom lines.
The latest: The city has filed a motion to dismiss the case, arguing that the companies’ claims are “variations on a handful of legally flawed ideas.”
It says, for instance, that the fee cap does not meet federal nor state criteria for “substantial impairment” of a contract because it takes place in a regulated industry and because this type of law was foreseeable. Both of the companies, it points out, included the possibility of this type of law in their IPO filings.
The California Chamber of Commerce responded with a brief in support of the delivery companies. The nonprofit business group called San Francisco’s price control “arbitrary” and said it will hurt the restaurants it is trying to help, along with consumers and workers, by leading to higher prices and worse service. It urged the court to deny the city’s motion to dismiss.
DoorDash, Grubhub and Uber vs. New York City
The background:The Big Apple’s own permanent fee cap came down in August. It limits delivery fees to 15% and fees for any other services to 5%.
The three companies shot back with a lawsuit in September, again calling the cap unconstitutional and blasting it as “driven by naked animosity toward third-party platforms.”
In a statement when the lawsuit was filed, Councilmember Mark Gjonaj, chair of the NYC Council Small Business Committee, defended the cap and called the lawsuit “baseless.”
The latest: New York City is expected to file a motion to dismiss the complaint; lawyers for the delivery companies have asked the court to set a deadline of Dec. 23 for that filing.
DoorDash vs. New York City
The background: Less than a week later, DoorDash filed another suit against New York. This one is related to a first-of-its-kind law that would force delivery companies to share more customer data with restaurants, including names, phone numbers and email addresses.
Like in the other cases, DoorDash called the rule unconstitutional. It argued that it threatens consumers’ privacy as well as its business model, which relies on that data for marketing and other purposes.
Under the law, customers would be able to opt out of sharing their data.
The rule is intended to help restaurants by giving them more information about their customers as well as the ability to communicate with them directly. But it drew criticism from consumer advocates and research groups that questioned, among other things, restaurants’ ability to protect the data.
The latest: After DoorDash asked a judge to block the law, the city in October voluntarily agreed not to enforce it while the suit continues.
In early December, both Uber Eats and Grubhub filed their own lawsuits over the data-sharing law. A judge ordered the Uber Eats suit combined with the DoorDash one, but as of publication time had not yet ruled on whether to also fold in Grubhub's suit.
The City of Chicago vs. DoorDash and Grubhub
The background: In a reversal of the trend, Chicago went after the two delivery giants with a lawsuit of its own, accusing them of deceptive business practices that it said have harmed restaurants and consumers.
The lengthy list of accusations can be seen here. They include claims that the services listed restaurants on their platforms without consent and sprung hidden fees on customers.
The companies called the charges “baseless” and “categorically wrong.”
The latest: In late October, Grubhub and DoorDash filed separate motions to dismiss the suit. Grubhub’s memo argues that the city lacks the authority to bring the suit and also provides evidence that counters many of the city’s allegations. For instance, it says diners and restaurants agree to every fee that they’re charged.
DoorDash’s memo highlights several apparent contradictions in Chicago’s suit. For instance, it says the suit accuses DoorDash of hiding fees from consumers, but later admits that DoorDash in fact discloses the fees.
Both companies also argue that they helped restaurants during the pandemic by temporarily reducing commissions and investing money to help struggling operators.