A class action lawsuit filed Monday alleges that third-party delivery companies DoorDash, Grubhub, Postmates, and Uber Eats are using their market power to push menu prices higher during the coronavirus pandemic, according to Reuters.
The three consumers who initiated the suit allege that third-party delivery companies dictate in their contracts the prices restaurants can charge for orders — even those placed directly with the business and not via delivery apps. These terms along with sky-high commission fees that can reach 30 percent or higher for each transaction, are in turn forcing restaurants to raise menu prices across the board. Paying customers ultimately shoulder that cost, whether they’re getting food delivered or eating in the restaurant dining room.
Of course, no one is eating in the restaurant dining room at the moment, but that’s another motivating factor behind the lawsuit, which has been filed against the backdrop of a global health crisis that’s shut down dining rooms and sent the entire restaurant industry spiraling.
With off-premises orders one of the few lifeline’s restaurants have right now, more businesses are forced to work with these third-party delivery services in an attempt to keep from going under. Customers ordering directly from the restaurants is better for business, but when third-party companies are dictating the menu prices, the cost hike ultimately falls on the consumer.
As the lawsuit, notes, third-party delivery apps offer “a devil’s choice” to restaurants: “In exchange for permission to participate in defendants’ meal delivery monopolies, restaurants must charge supra-competitive prices to consumers who do not buy their meals through the delivery apps, ultimately driving those consumers to defendants’ platforms,” it said.
The lawsuit is just the latest addition to an ever-growing list of griefs advocates, lawmakers, customers, and the restaurants themselves have with third-party delivery companies. Many of those griefs, such as the high price of commission fees, are even more pronounced now that dining rooms are shuttered and some restaurants are having to close their doors permanently.
Meanwhile, reading any announcements about “relief” companies like DoorDash or Uber Eats are providing restaurants during the pandemic has become an exercise in reading between the lines to decipher the fine print. Case in point: Grubhub said in March it would provide relief by deferring commission fees for restaurants. Those fees have to be paid back within four weeks of the relief period ending, and simultaneously lock restaurants into a full year of being on Grubhub’s platform.
Last week, San Francisco introduced an emergency measure to cap commission fees from third-party delivery services at 15 percent. Some services, notably DoorDash and Postmates, are cutting down or waiving those fees for a set period of time. However, those measures are band-aids to a problem that existed long before the pandemic hit and will persist long after it subsides.
Unless enough customers get fed up with third-party delivery tactics. This week’s lawsuit suggests that is already happening. As of last week, 17 million people have filed for unemployment in the U.S., and analysts expect that number to keep rising. Many consumers are finding themselves in a position where it will be hard to pay the bills, let alone a hiked up menu price on a bowl of pasta from their local restaurant. And if a restaurant doesn’t have the power to change the price on that pasta, everyone loses out, and the power of these delivery companies has, in the words of this week’s suit, “come at a great cost to American society.”