Class Action Filed Against Grubhub, DoorDash, Postmates, and Uber Technologies – Companies Allegedly Use Their Meal Delivery Market Monopoly Power To Prevent Competition And Limit Consumer Choice

Kehoe Law Firm, P.C. is making consumers aware that on April 13, 2020, a class action lawsuit was filed against Grubhub, Inc., also doing business as Seamless, DoorDash Inc., Postmates Inc., and Uber Technologies, Inc., in its own right and as parent of wholly-owned subsidiary Uber Eats, in United States District Court, Southern District of New York.

According to the complaint, “Defendants’ anticompetitive conduct has enabled each Defendant to: (a) prevent and limit competition in the Meal Delivery Market; (b) prevent and limit competition in the Direct Purchase Market; [and] (c) prevent and limit competition in the Dine-In Market.”  Class members, allegedly, “. . . purchased meals from restaurants that were subject to Defendants’ [No Price Competition Clause]. As a result of Defendants’ illegal conduct, these consumers were compelled to pay artificially inflated prices for their meals.” [Emphasis added.]

The complaint, among other things, alleges the following:

Unable to compete on anything that ‘meaningfully impact[s] user experience,’ each Defendant instead uses its monopoly power in the meal delivery market to prevent competition and limit consumer choice. Specifically, Defendants use their market power to impose unlawful price restraints in their merchant contracts, which have the design and effect of restricting price competition from competitors in order to maintain the Delivery Apps’ market share.

In their form contracts with restaurants, Defendants include clauses requiring uniform prices for restaurants’ menu items throughout all purchase platforms (the “No Price Competition Clause” or “NPCC”). The NPCCs prevent restaurants from charging different prices to meal delivery customers than they charge to dine-in customers for the same menu items. The purpose and effect of the No Price Competition Clause is to act as an unlawful price restraint that prevents restaurants from gaining marketshare and increased profitability per consumer by offering lower prices to consumers. The NPCCs target and harm not only restaurants, but also two distinct classes of consumers: (1) consumers who purchase directly from restaurants in the Meal Delivery Market; and (2) consumers who buy their meals in the separate and distinct restaurant Dine-In Market.[] Both restaurants and consumers would benefit absent Defendants’ unlawful restraints[.]

The rise of the four Defendants has come at great cost to American society. Defendants offer restaurants a devil’s choice: 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. Unable to offer consumers the increased choice of paying better prices to dine-in, restaurants have seen precious dine-in customers slip away year after year.

Defendants’ NPCCs work by forcing Direct and Dine-In consumers to shoulder Defendants’ exorbitant economic rents. While both meals sold through Defendants’ platforms and directly from the restaurant share the same costs and overhead, meals sold through the Delivery Apps are more expensive, because of Defendants’ high fees. Restaurants must calibrate their prices to the more costly meals served through the Delivery Apps in order to not lose money on those sales. Defendants’ unlawful NPCCs then force restaurants to also charge those higher prices to Dine-In and Direct Consumers, even though the cost of those consumers’ meals are lower as they do not include Defendants’ exorbitant fees.

Absent Defendants’ unlawful restraints, restaurants could offer consumers lower prices for direct sales, because direct consumers are more profitable. This is particularly true of Dine-In consumers, who purchase drinks and additional items, tip staff, and generate good will. Restaurants cannot offer Plaintiffs and the class this lower cost option, because the Delivery Apps’ No Price Competition Clauses prevent them from doing so. [Emphasis added.]

The Class is defined as all persons or entities who, since April 14, 2016, either 1) purchased meals directly from any restaurant contemporaneously contracted with the Delivery Apps or 2) all persons or entities who purchased Dine-In meals from any restaurant contracted with the Delivery Apps of Defendants Grubhub, Uber and/or Uber Eats, Postmates and/or DoorDash. 

Kehoe Law Firm, P.C.