One brand says third parties are 'bleeding New York restaurants dry.'
The owner of a Manhattan bakery alleges third-party delivery aggregators are violating New York City’s cap on delivery fees, according to a new lawsuit.
Micheli & Shel—parent of of Michaeli Bakery—targets Grubhub, DoorDash, Uber Eats, and Postmates, accusing each one of using “ambiguous” and “deceitful” methods to get around the cap. In response, Grubhub told the Wall Street Journal, “We look forward to responding to these baseless allegations.” DoorDash told the publication that it “has always supported restaurants, and claims to the contrary are simply wrong.” Uber Eats declined to comment on the matter.
As countless restaurants shifted to off-premises last year, New York City was one of many metropolitan markets to implement caps in an effort to shield restaurants from rising delivery fees.
The legislation, effective June 2020, placed a 20 percent cap on all fees a third-party delivery company could charge restaurants, including a 15 percent max on all fees charged for delivery and a 5 percent cap for any additional fees, such as marketing, credit card processing, or any other fees. In September, the rule was amended to allow “pass-through” costs like credit card fees to be charged above the 20 percent total cap.
Micheli & Shel claims the behavior of third-party delivery companies hasn't changed. The company states third parties “proceeded to continue their prior practices of bleeding New York City’s restaurants dry while collecting millions of dollars at their expense in blatant disregard for the laws of the City of New York.”
It proposes to represent a class-action lawsuit composed of “all food service establishments that contracted with Defendants for delivery services, with businesses located within New York City that were improperly charged by Defendants for delivery services.”
“Despite the passing of the Delivery App. Legislation and the Amended Delivery App. Legislation, Plaintiff and the Class members continued to be charged in excess of the fifteen percent (15%) delivery fee cap and five (5%) cap on all additional fees,” the lawsuit states. “Notably, these fees are in addition to the fees Defendants’ also collect from the individuals placing the delivery orders. Put in another way, Defendants continue to profit on both ends of the transaction, yet nevertheless still refused to abide by the mandated fee caps.”
New York City restaurants have been at the mercy of third-party delivery companies through a good portion of the pandemic. After New York shut down on-premises areas in March 2020, outdoor dining didn’t return to the Big Apple until June 2020. Indoor dining came back September 30 at 25 percent capacity, but a few weeks later it was shut off again due to rising COVID cases. It returned again in February at 25 percent, and then moved to 50 percent in March. On May 7, restaurants were allowed 75 percent capacity, and on May 19, the city moved to 100 percent capacity with social distancing requirements.
“This Class Action seeks to hold Defendants accountable for their predatory behavior on businesses most impacted by the COVID 19 Pandemic,” the lawsuit states. “The Defendants extorted the Plaintiff and other similarly situated Class members that were desperately dependent on their delivery services during a time when the restaurant industry was experiencing a historic decline in sales and the largest disruption the restaurant industry had faced in NYC since Hurricane Sandy in 2012 and the September 11, 2001, terrorist attacks.”
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