• by Steve Ellwanger , August 31, 2021

New York, Illinois and California have erected new speed bumps on the road to profitability for third-party food deliverers via lawsuits and legislative actions.

Last week, the New York City Council passed and sent to Mayor Bill de Blasio a bill that would make 15% temporary caps on delivery fees permanent, while the city of Chicago sued DoorDash and Grubhub for alleged deceptive practices in their dealings with restaurants and consumers.

The previous week, a judge in California overturned Proposition 22, which had enabled delivery aggregators to treat their drivers as independent contractors as opposed to employees.

If de Blasio signs the New York City Council legislation, companies like DoorDash, Grubhub and Uber Eats would be able to charge restaurants no more than 15% per delivery order and 5% or less for marketing and other fees.

Separately, the Council approved another piece of legislation that would afford more enforcement of regulations prohibiting third-party delivery services from listing restaurants on their sites that they do not actually represent.

As previously reported, Grubhub’s No. 1 roadblock to profitability in the United States is government-mandated caps on the fees it charges restaurants.

“The fact is, permanent price controls are unnecessary and unconstitutional, and will hurt small businesses, delivery workers, customers and the local economy,” Grubhub said in a statement reported by Bloomberg.

Chicago’s lawsuits against DoorDash and Grubhub echo similar legal actions against third-party services in recent years.

“The complaints allege that DoorDash and Grubhub’s misconduct has been ongoing for years and continues to this day,” the filings state. Grubhub is accused of “deceptively” sharing phone numbers for customers to connect with restaurants and charging the restaurants a commission even if no order is placed.

In addition, Grubub allegedly created “imposter websites” for restaurants in order to
send customers to its own platform.

Chicago officials alleged that DoorDash has misled customers about how their tips for
drivers would be used.

In addition, DoorDash and Grubhub were both accused of advertising order and delivery services “from unaffiliated restaurants without their consent, leaving restaurants to repair reputational damage and resolve consumer complaints.”

Both companies described the legal actions as “baseless” as reported by Nation’s Restaurant News.

In overturning Proposition 22 in California, the judge ruled it unconstitutional because it limits the state legislature’s power to determine which workers are covered by the state worker’s compensation system. The measure was passed by voters last November.

“We believe the judge made a serious error by ignoring a century’s worth of case law requiring the courts to guard the voters’ right of initiative,” the Protect App-Based Drivers +Services Coalition stated. The organization — whose backers backers include DoorDash, Instacart, Lyft and Uber — said it will appeal the judge’s ruling.