On Friday, July 16, 2021, DoorDash and Grubhub filed a complaint against the City and County of San Francisco in the U.S. District Court, Northern District of California, claiming that the recently introduced permanent cap on additional fees for app-based delivery orders is unconstitutional.
The San Francisco Board of Supervisors passed a law last month permanently capping additional fees on app-based delivery orders at 15%. DoorDash and Grubhub’s complaint claims this permanent cap on fees is unconstitutional because “it disrupts contracts between platforms and restaurants, and permanently dictates the economic terms on which a dynamic industry operates.” DoorDash and Grubhub claim this cap is unnecessary “because restaurants currently have an array of options for delivery, including options well below the price control established by [San Francisco].” They further claim that this cap will “lead to reduced choice for restaurants, higher prices for consumers, and fewer delivery opportunities for couriers.” The complaint further alleges that the cap is “intended to punish the industry for its recent support of Proposition 22. . . and is intended to make third-party platforms less profitable.” Proposition 22, which passed with 59% of the vote in California’s November 2020 state election, granted app-based transportation and delivery companies an exception to California Assembly Bill 5, allowing the companies to classify their drivers as independent contractors rather than employees.
The complaint states that “California courts consistently have held that cities may not fix prices to benefit only a segment of the general public – such as one industry or group of businesses.” As such, “the only price controls that typically survive constitutional scrutiny are those applicable to public utilities of civic necessities (e.g., electricity, gas, water).” DoorDash and Grubhub argue that they should not be regulated like public utilities since they “are not so essential to public health or safety, particularly as the pandemic abates.” The companies further distinguish themselves from public utilities since “[p]laintiffs compete vigorously with each other and other platforms, and merchants and consumers can choose which platform(s) to use, if any.”
The complaint seeks declaratory relief, injunctive relief, and damages on seven grounds: (1) The cap violates the Contracts Clauses of the U.S. and California Constitutions; (2) the cap violates the Takings Clauses of the Fifth and Fourteenth Amendments of the U.S. Constitution and Article I, Section 19 of the California Constitution; (3) the cap violates Article I, Section 7 of the California Constitution; (4) the cap violates the Fourteenth Amendment to the U.S. Constitution and Article I, Section 7 of the California Constitution; (5) the cap violates the Fourteenth Amendment to the U.S. Constitution and Article I, Section 7 of the California Constitution; (6) the cap violates the First Amendment to the U.S. Constitution and Article I, Section 2 of the California Constitution; and (7) the cap violates the Dormant Commerce Clause of the U.S. Constitution. Relief is sought under 42 U.S.C. § 1983.
DoorDash, Grubhub Sue San Francisco Over Recently Passed Fee Cap Limits, California Globe (July 19, 2021)
Doordash, Inc. et al v. San Francisco City and County (Case No. 3:2021cv05502)
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