Four food-delivery apps have agreed to drop lawsuits against the city in exchange for the City Council approving a law that will relax pandemic-era caps on the fees that those companies can charge to restaurants.
The council on Thursday is expected to pass a bill that will partially roll back New York’s landmark 2021 law that barred apps such as DoorDash and Uber Eats from charging restaurants more than 15% of the price of an online order. With allowances for additional 5% marketing costs and 3% credit card fees, that law effectively capped fees at 23%; that figure will rise to a maximum of 43% under the new law, which states that apps can charge restaurants another 20% for “enhanced” services.
Although the bill is listed on the council’s agenda like any other piece of legislation, it is the product of behind-the-scenes legal talks. In a settlement reached April 23, delivery companies Grubhub, DoorDash, UberEats and Relay agreed to drop two pending lawsuits in exchange for the City Council making “best efforts” to pass the measure and raise the fee caps.
Those suits include one that the companies filed in 2021 against the fee-cap law, and another case brought in 2023 that sought to block a separate law that raised the minimum wage for delivery workers. The city’s Law Department shared a copy of the settlement with Crain’s, details of which have not previously been reported. The deal does not mention any money being exchanged as part of the settlement and says both parties will pay their own attorneys’ fees.
The passage of Thursday’s bill is arguably a setback for the restaurant industry, which had strongly opposed the fee-raising measure when it was first introduced last year. But the app-based companies have lobbied lawmakers for months to raise the fee caps, records show, and hospitality industry leaders say they secured some compromises to make it more palatable.
“These lawsuits have created unnecessary confusion and cost delivery workers millions in wages due to the delays they caused, and we are happy to see them come to a close,” City Hall spokesman Zachary Nosanchuk said.
Eli Scheinholtz, a spokesman for DoorDash, said in a statement that the company “always believed collaborative solutions — not courtrooms — are the best path forward.” He said the deal with the city would help create “a more sustainable future for local restaurants and level the playing field for delivery workers throughout New York City.”
New York last month already began implementing the $21.44 minimum pay for app-based delivery workers after an appeals court declined to block the rule from taking effect. But the apps’ lawsuit remained active, and one plaintiff, Relay, has not needed to comply with the wage rule thanks to a separate ruling it secured. Under the settlement, Relay will join the other apps in dropping the suit and paying the $21.44 wage once the fee-cap bill takes effect, 30 days after it becomes law.
In court filings last week and on Tuesday, the app-based companies asked the judges overseeing both lawsuits to halt proceedings, heeding a section of the settlement that said the companies would request a pause once the bill was placed on the City Council’s meeting agenda.
“Isn’t our first choice”
The city began taking steps to cap delivery fees during the height of the pandemic in 2020, as restaurants became reliant on third-party delivery apps to stay alive but complained that they were being forced to pay exorbitant fees to wealthy delivery corporations. With the crisis in the rearview mirror, Bronx Councilman Rafael Salamanca introduced the bill last April to relax the restrictions, which supporters said would actually help restaurants by letting them pay extra to market themselves through the delivery apps.
DoorDash, Uber and Grubhub have all reported spending tens of thousands of dollars to lobby Salamanca and other officials about the bill since last year, city records show. Salamanca, in a statement on Wednesday, called his bill “a long-overdue compromise that serves as a major win for local restaurants and consumers.”
“Let me clear; this legislation maintains a strong cap on delivery fees, while providing the flexibility for additional restaurant marketing services, making it, without exaggeration, the strongest food delivery commission cap of its kind in the country,” Salamanca said.
Andrew Rigie, executive director of the New York Hospitality Alliance, lambasted last year’s proposal as doing the bidding of “monopolistic” apps. But the industry has won some revisions: The bill maintains a 5% cap on “basic” marketing fees and now specifies that restaurants that pay that minimum fee will appear in apps’ search results and can expect the apps to deliver within at least a 1-mile radius of the restaurant.
Restaurants that opt to pay for the newly allowed “enhanced” fees, costing up to 20% of an order, could benefit from whatever services an app might offer, such as letting the restaurant advertise on the delivery company’s website or being listed at the top of search results. Industry advocates previously warned that restaurants operating on thin margins might feel obligated to pay the higher fees.
“Lifting the cap isn’t our first choice — but when circumstances required it, we fought to ensure the changes came with strong new protections for restaurants,” Rigie said in a statement. “If enacted, we’ll monitor closely to make sure it delivers on its promises to protect restaurants from exploitation, and we’ll use this moment to reset the relationship with delivery companies and push for one where restaurants are treated fairly, and where we can all thrive and collaborate together.”
