Three Major Delivery Apps Can't Escape a Class Action Lawsuit Over Their Pricing Rules
The major restaurant delivery brands Grubhub, Uber Eats, and its subsidiary Postmates will have to face a proposed class action lawsuit alleging that the companies' practices have driven up the price of restaurant food after a federal judge refused to dismiss the case this past Wednesday.
The lawsuit, originally filed in 2020, claims that by forcing restaurants into "no-price competition clauses," major delivery services are inflating the price of ordering from the restaurants they work with since these clauses prevent restaurants from offering their food cheaper anywhere else, even directly from the restaurant.
"Defendants charge restaurants fees ranging from 13.5 percent to 40 percent of revenues, even though the average restaurant's profits range from 3 percent to 9 percent of revenues," Frank LLP, the law firm handling the suit, wrote on their website. "All of this harms consumers and restaurants alike. Restaurants have to charge consumers supra-competitive prices to those who do not buy their meals through the delivery apps, so consumers are driven to purchase meals through the apps. But because of defendants' unjustifiably high fees, meals sold through the apps are more expensive than they should be."
Grubhub, Uber Eats, and Postmates had asked for the lawsuit to be dismissed, but U.S. District Judge Lewis Kaplan in Manhattan denied that request, according to Bloomberg, writing that the suit "alleges plausibly that restaurants cannot feasibly avoid doing business" with these delivery companies and "that restaurants—being foreclosed from lowering prices in the direct markets to attract sales—have had no choice but to raise prices in both the platform and direct markets."
In a comment sent to Bloomberg, a Grubhhub spokesperson stated that the company is "disappointed in the decision and we will continue to defend our business and the services we offer restaurants and diners."
The lawsuit seeks damages for customers who purchased food directly from restaurants contracted with these delivery services either for delivery or dining in dating back to April of 2016.