Delivery Giants Settle NYC Fee Cap Lawsuit, Paving Way for Policy Change

The three largest food delivery companies DoorDash, Grubhub and Uber Eats reached a settlement with New York City over a controversial bill that banned certain fees for restaurants. It was filed in federal court in Manhattan on Wednesday and would allow changes to the 2020 bill which sought to help struggling restaurants during the COVID-19 pandemic.

Under the initial law delivery platforms could only charge 15% for food deliveries and 5% for advertisement and other services. The restrictions were initially enacted to be temporary but in August 2021 the New York City Council made the cap permanent, so the delivery platforms filed suit claiming that the cap violated their allowances under the United States and state constitutions by limiting their ability to contract freely and prevented them from doing business in the same manner as before with hundreds of millions lost in revenues.

Settlement Terms and Industry Impact

The companies have agreed to withdraw their lawsuit with prejudice (meaning that they cannot refile it) so long as the City Council makes mutually agreed legal changes. The companies can revive their case if the updated fee structure provides a combined ceiling of 23% for delivery, service and transaction fees or a ceiling of 43% where enhanced service fees are included.

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Uber spokesman Josh Gold described the settlement as “a win for small restaurants, taxpayers, and delivery workers,” as it gives businesses more flexibility and avoids time consuming and expensive litigation. DoorDash and Grubhub have not made statements on the settlement but the case demonstrates how COVID-19 era protections are being re-examined in a post pandemic climate.

Final terms are due by December 31st and if approved the case DoorDash v. City of New York, 1:21-cv-07564  will constitute a pivotal moment in urban markets regarding the economics of delivery apps.