Third-party delivery companies are facing more legal scrutiny as a New York federal judge allowed a lawsuit accusing Uber Eats, Postmates, and Grubuhb of menu price exploitation to move forward. The anti-trust lawsuit was originally filed in July 2020 and accused the third-party delivery companies of monopolizing delivery prices by not allowing restaurants who contract with them to sell menu items to consumers at lower prices on other platforms, including direct delivery platforms.
After the delivery companies moved to dismiss, U.S. District Judge Lewis Kaplan in Manhattan ruled a year and a half after the case was initially filed that requiring operators to accept “no-price competition clauses” gave them “no choice but to raise prices” on every platform.
Plaintiffs claim that due to these no-competition clauses, restaurants could not even lower prices for takeout or dine-in orders, or for orders placed on competitor delivery apps, and that these contracts discouraged them from using other platforms. These issues were further compounded by the 5-10% fees charged to operators and 20-30% commission fees charged to diners.
“Defendants’ motion to dismiss is denied in its entirety,” Kaplan said in his decision.
In a statement sent to Bloomberg, Grubhub said that it is “disappointed in the decision” and “we will continue to defend our business and the services we offer restaurants and diners.”
This is not the first time that third-party delivery companies have had to defend their practices legally during the pandemic. Currently, Grubhub is being sued by Washington, D.C. for deceptive business practices, including obscuring fees and failing to disclose menu practice increases, and restaurant operators by adding them to the Grubhub directory without their consent.
Last year, the city of Chicago sued Grubhub and DoorDash for similar reasons, with both companies calling the lawsuits “baseless.” At the time, the city sought more transparency, civil penalties and restitution for consumers and restaurants hurt by the alleged practices.