Uber Eats, GrubHub, Others Sued For Hiking Fees Charged To Restaurants For Deliveries During Pandemic

Food delivery companies are facing a proposed class action lawsuit for hiking fees charged to restaurants during the novel coronavirus (COVID-19) pandemic, Reuters reported Monday.

What Happened

The lawsuit filed Monday alleges that Uber Technologies Inc. UBER subsidiary Uber Eats, GrubHub Inc. GRUB, Postmates, and DoorDash are using their market dominance to charge the restaurants as much as 10% to 40% commission on food sales, according to Reuters.

The restaurants' only option to make up for the fees is to hike their menu prices and charge all customers extra, irrespective of whether they order through the platform or not, the lawsuit said, as reported by Reuters.

"Plaintiffs bring this claim for relief on behalf of all Americans who would still [like] to enjoy a nice dinner out with their family before defendants make that impossible," the complaint said, as per Reuters.

Why It Matters

The coronavirus pandemic has significantly reduced the in-restaurant dinings as authorities have imposed widespread lockdowns to curb the spread of the virus and asked citizens to stay indoors and practice social-distancing.

Both restaurants and consumers rely on the food delivery businesses as the intermediary.

Uber's food delivery business has seen an increase, while its on-demand ride-hailing service is seeing lower demand. The company recently offered its drivers the option to get extra work in the food delivery business if they aren't getting enough rides.

There has been price-gouging of essential products needed during the pandemic, including hand sanitizers and medical masks, on platforms like Amazon.com Inc. AMZN, but this is one of the first instances of major companies being accused of exploiting the coronavirus pandemic.

Price Action

Uber's shares closed 3.3% higher at $27.99 on Monday and added another 0.4% in the after-hours session at $28.10.

GrubHub stock closed 12% lower at $39.68 per share. It traded mostly flat in the after-hours session.