Food delivery giants are pushing back against New York City's attempts to support local restaurants: DoorDash
The caps limit what the multi-billion dollar companies can charge restaurants for their services. They were put in place last May when many restaurants had virtually no choice but to use delivery apps for online ordering.
Food delivery companies were some of the only businesses that saw their profits increase during the pandemic. Now, local governments are worried about the power these companies have gained over restaurants and consumers. Many have established new laws or filed suits against the delivery giants in an effort to bring the companies under control.
The suits filed against the government are an attempt by the companies to work free of the city's control once again. However, they argue the government had no right to try to control them in these ways in the first place.
The food delivery companies allege that New York City's price caps were an overreach by the government. The lawsuit is attempting to win an injunction against the August agreement extending the price caps into early next year. In the suit, the companies say they are owed an unspecified amount of monetary damages from the city, as well as a jury trial.
According to the suit, the caps have cost the companies "hundreds of millions of dollars" collectively through this July.
Restaurant owners began to complain to the city about the apps when they started facing online ordering service fees of up to 30%. In response, New York City limited the total amount that food delivery services could charge restaurants to 20%, including marketing and the online service fee. According to legal experts, the New York City price caps are legally sound; although, the delivery companies believe otherwise.
"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," the price cap suit states.
The suit also claims that, because the city has continuously extended the price caps over the course of the past year, they effectively function as a permanent cap.
"Price controls can lead to higher prices for consumers, which can reduce orders and earnings for Dashers," DoorDash said in a statement. "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."
Less than a week after the price caps suit was filed, DoorDash filed a second suit regarding a new NYC law that requires delivery apps to share their customer data with the restaurants whose food they deliver. The company argues that this requirement gives restaurants an unfair advantage and that sharing the data would be a violation of their customers' privacy.
Like the price cap allegations, the DoorDash allegations argue that New York is stepping over its bounds as the city governmental body, this time with one of a series of new laws aimed at supporting local businesses. The law in question requires food delivery companies to share customer names, email addresses, phone numbers, and delivery addresses with the restaurants that appear on their apps.
DoorDash argues that the requirement is a "shocking and invasive intrusion of consumers' privacy" and that forcing it to share the data would be giving restaurants a "free-ride".
New laws and regulations are just a few of the ways that state and local governments are trying to rein in delivery companies.
In Chicago, the companies themselves are facing a lawsuit from city officials. The city's suit alleges that the companies did harm to local businesses during the pandemic via their high service fees, as well as several other allegations regarding misleading customers. A suit was filed by Massachusetts' attorney general over similar allegations related to the companies' pricing.
Of course, in California, the fight over worker classification adds a whole other dimension to the fight between delivery companies and state and local governments.
