As millions of Americans are confined in their homes amid a pandemic, hard-hit restaurants are being forced to charge higher prices to meet the demands of food delivery services, according to a 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 entire food delivery business is being roiled by closing restaurants and customers deciding to cook their own food rather than risk coming into contact with other people. That’s forced companies like GrubHub to offer food discounts and reduce or eliminate delivery fees. GrubHub on Monday cut earnings guidance as demand suffered in New York and elsewhere.
The New York customers, who seek class-action status, say the delivery services charge “exorbitant fees” that range from 13% to 40% of revenue, while the average restaurant’s profit ranges from 3% to 9% of revenue, making delivery meals more expensive for eateries.
“Restaurants could offer consumers lower prices for direct sales, because direct consumers are more profitable,” the plaintiffs said. “This is particularly true of dine-in consumers, who purchase drinks and additional items, tip staff, and generate good will.”
The Covid-19 pandemic has “annihilated the dine-in market” as states and cities have forced restaurants to shut their premises to diners, forcing them to rely on deliveries take-outs and drive-throughs to survive.
The companies didn’t immediately respond to requests for comment on the lawsuit.
The case is Davitashvili v GrubHub Inc., 20-cv-3000, U.S. District Court, Southern District of New York.