SAN FRANCISCO (Legal Newsline) – Lawyers for San Francisco say the city was justified in enacting a cap on how much third-party delivery companies like Doordash and GrubHub can charge.
The City was protecting the restaurant industry when it came up with the 15% limit, a Sept. 10 motion to dismiss a lawsuit filed by the two companies. That lawsuit complains San Francisco’s cap imposes price controls on a private and highly competitive industry.
Restaurants and delivery services are unable to freely negotiate, the lawsuit says.
“The City took the action in an effort to address the decline of the restaurant industry—businesses that are critical to the economic and social vitality of San Francisco’s commercial corridors, and that have struggled with the high commissions that the largest third-party platforms have been able to impose through their market dominance,” the motion says.
“Plaintiffs’ numerous claims are variations on a handful of legally flawed ideas.”
Doordash and GrubHub allege the cap is harmful and unnecessary because restaurants currently have an array of options for delivery, including options well below the price control, and the legislation will likely lead to reduced choice for restaurants, higher prices for consumers, and fewer delivery opportunities for couriers.
The motion to dismiss argues the complaint:
-Fails to state a claim for violation of the Contract Clause;
-Fails to state a Fifth Amendment unconstitutional taking claim; and
-Fails to state a claim for violation of due process and equal protection.
“(W)hile the Complaint contains a conclusory allegation that third-party platforms are similarly situated to other businesses that contract with restaurants, it does not allege facts to negate the bases to distinguish between them expressed in the Ordinance’s findings, e.g., that the decline of the restaurant industry has coincided with the rise of third-party delivery services, in which just four companies control 98% of the market and are able to use their disproportionate leverage to impose high fees,” the motion says.
Legislators could rationally believe that the same market dynamics do not apply to other vendors with which restaurants contract.”