Food delivery services are being sued for putting hefty commissions on restaurants that have been struggling over the current pandemic. This, in turn, causes said restaurants to inflate their menu prices to keep up with the demand, and they have had enough.
The Class Action Lawsuit
A group of New Yorkers sued GrubHub, DoorDash, Postmates, and Uber Eats, accusing them of using their market power to stop restaurants from discounting meals to customers who order directly, even though it's cheaper to do that.
The lawsuit also claims that the delivery services charge from a range of 13 to 40% of revenue. In comparison, the average restaurant's profit ranges only a mere 3 to 9% revenue, which makes delivery services expensive for eateries.
They were filed just this Monday in Manhattan federal court by three New York customers, with accusations regarding food companies exploiting their dominance in the food delivery industry by imposing "exorbitant" convenience fees.
The lawsuit claims that the three companies, including Seamless, put restaurants into a tough position because of the high commission fees. Resulting in restaurants choosing the "devil's choice" and charge customers more than the usual amount to keep the business afloat.
Even before the coronavirus pandemic, these restaurants were already struggling to keep their tables full. With the current situation, where everyone is facing the pandemic and lockdown, restaurants are struggling more. It only adds more problems for restaurants as they've been forced to close, and the only way for their business to work is through pick-up and delivery meals.
One of the complaints said, "For example, in New York City ... Grubhub has a whopping 66 percent market share of the meal delivery market,'
What Are They Trying To Get Out Of The Class Action Lawsuit
The suit is seeking triple damages, including for overcharges since the date of Apr. 14, for both dine-in and delivery customers in restaurants all over the US using the defendant's delivery apps.
A complainant said to CNBC, "'Plaintiffs bring this claim for relief on behalf of all Americans who would still [like] to enjoy a nice dinner out with their family before defendants make that impossible,"
Plaintiff Mariam Davitashvili who lives in Brooklyn said over to the New York Post, "Their fees are outrageous,"
There were similar concerns raised by New York lawmakers last February when they introduced legislation to the City Council in hopes of limiting delivery companies commission fees at only 10 percent for each order. The legislation also called for these companies to be more transparent in just how much they charge restaurants for their services.
Mayor Bill de Blasio is being called upon by lawmakers as well as trade groups to enact an emergency commission fee cap on delivery services to ease the financial strains on restaurants.
No comment from Grubhub, Doordash, and Uber Eats as of this moment.