Restaurant prices higher due to rise of apps like Grubhub, UberEats: suit

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Restaurant customers may be paying higher prices for food — whether delivered or not — thanks to the rise of apps like Grubhub and UberEats, according to a new lawsuit.

Grubhub, UberEats, Postmates and DoorDash have been engaging in anticompetitive practices through contracts that dictate what restaurant customers can charge for food orders that weren’t even generated through them, according to a shocking Manhattan federal lawsuit filed Monday.

These contracts — combined with high app fees ranging from 13.5 percent to 40 percent — can force restaurants to raise their prices across the board, including for sit-down dining and direct takeout orders, the suit said.

The apps “offer restaurants a devil’s choice,” the lawsuit claims. “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.”

“The rise of the four defendants has come at great cost to American society,” said the suit filed by antitrust lawyer Gregory Frank.

If it weren’t for these anticompetitive contracts, restaurants could lower their prices for consumers who cost them less because they bypass the apps, the lawsuit claims. But restaurants are forbidden from lowering their prices for these customers “because the delivery apps’ no price competition clauses prevent them from doing so,” the lawsuit said.

DoorDash, UberEats and Grubhub declined to comment. Postmates never responded to a request for comment.

The suit, which is seeking class-action status, represents three people who have ordered food directly from restaurants, including through sit-down dining, that do business with these apps in a range of cities, including New York, New Orleans, Chicago, Boston and Los Angeles.

“Their fees are outrageous,” said Mariam Davitashvili, a plaintiff in the suit who lives in Brooklyn. Davitashvili said she doesn’t agree she should be “paying more for my food” to protect these apps.

The suit says restaurants often have little choice but to sign onerous contracts with delivery app companies because they control the market for food ordering in their respective markets. “For example, in New York City … Grubhub has a whopping 66 percent market share of the meal delivery market,” the lawsuit says.

This stranglehold has only gotten stronger in the face of the coronavirus, which “has annihilated the dine-in market” and made companies ever more reliant on delivery, the lawsuit said.

Apps like Grubhub that promised to suspend fees during the pandemic have come under fire for fine print in their contracts that largely deferred fees instead of eliminating them.

“It’s a bait and switch,” said Jeremy Wladis, president of the Restaurant Group, which owns Good Enough to Eat, Harvest Kitchen and Brad’s Burgers & BBQ.

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