…Grubhub took another blow at the end of last week when a New York City council member called for an antitrust investigation into the company.
In a letter dated July 2 and obtained by the New York Post, Mark Gjonaj, head of the City Council’s Committee on Small Business, asked New York Attorney General Letitia James to open the investigation and revisit the 2013 settlement agreement that allowed Grubhub to purchase Seamless.
“While I am not accusing any entity of committing unlawful acts, I do believe that Grubhub’s outsized market share and heavy-handed tactics could lead to artificially reduced competition which in turn may drive up the commissions paid by struggling locally owned restaurants,” Gjonaj wrote.
Currently, Grubhub controls 69 percent of the food delivery market in NYC, according to Gregory Frank, an antitrust lawyer who testified at the June oversight hearing in NYC that addressed concerns over the commission fee Grubhub and other third-party delivery services charge restaurants.
The call for an antitrust investigation comes on the heels of a report that Grubhub has been buying website domains by the thousands and creating so-called shadow sites without those restaurants’ knowledge. At the same time the New York State Liquor Authority is creating new rules that could cap the fees Grubhub can charge its participating restaurants to 10 percent. Currently, those fees range anywhere from 15 to 30 percent. Grubhub has denied those accusations.
Grubhub isn’t the only player in the third-party delivery space currently under scrutiny. Earlier this month, the UK government’s Competition and Markets Authority put the brakes on Amazon’s minority investment in Deliveroo while it investigates potential breaches of competition rules.
Third-party food delivery apps were recently predicted to have 44 million U.S. usersby 2020. More lawmakers are stepping in to regulate the market, combined with others questioning the economics of third-party food delivery, and still others urging brands to pull their delivery programs back in house suggest the honeymoon period for third-party is over. Massive players like Grubhub aren’t going anywhere anytime soon, but they’ll likely be operating under far more scrutiny from government bodies and civilians alike going forward.