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Grubhub, Uber Eats, Postmates must face diners' lawsuit over U.S. restaurant prices

NEW YORK (Reuters) - A U.S. judge on Wednesday said Grubhub, Uber Eats and Postmates must face an antitrust lawsuit by diners who accused them of driving up menu prices by exploiting their dominance in meal deliveries during the COVID-19 pandemic.

FILE PHOTO: Delivery bags with logos of Uber Eats are seen on a street amid the outbreak of the coronavirus disease (COVID-19) in central Kiev, Ukraine May 27, 2020. REUTERS/Valentyn Ogirenko/File Photo

U.S. District Judge Lewis Kaplan in Manhattan said it was reasonable to infer that requiring restaurants to accept “no-price competition clauses” left them with “no choice but to raise prices” regardless of where diners ordered meals.

He also said diners plausibly alleged that Grubhub and Uber Eats’ more restrictive clauses discouraged restaurants from using other platforms, despite their need to generate enough sales to stay afloat and offset low profit margins.

“Defendants’ motion to dismiss is denied in its entirety,” Kaplan wrote.

Diners claimed that the no-price competition clauses barred restaurants from charging lower prices for dining in or ordering takeout, while Grubhub and Uber Eats also forbade restaurants from charging less to customers who ordered on rival platforms.

They said the harm from inflated meal prices was compounded by “supracompetitive” 5% to 10% delivery fees charged to diners and 30% commission rates often charged to restaurants.

The proposed class action sought triple and other damages for dine-in and delivery customers in the United States since April 2016.

Grubhub, owned by Netherlands-based Just Eat Takeaway.com, said it was disappointed with the decision and will continue defending its dining-related services.

Uber Eats and Postmates, both owned by Uber Technologies Inc, did not immediately respond to requests for comment. Lawyers for the diners said they were pleased with the decision.

The practices of delivery companies faced increased scrutiny after the pandemic forced tens of thousands of restaurants to close and many more to temporarily shut their dining rooms.

Grubhub, Uber Eats and rival DoorDash Inc have also sued to overturn a New York City law capping the fees they charge restaurants at 15%, while Grubhub and DoorDash are challenging a similar law in San Francisco.

The case is Davitashvili et al v Grubhub Inc et al, U.S. District Court, Southern District of New York, No. 20-03000.

Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker

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