Order’s Up: Online Food Ordering Platforms See Upticks in Biz, Litigation Since COVID

While many industries limped through the COVID-19 pandemic, online food order and delivery platforms thrived in the face of the nationwide shutdown. Restaurants and patrons alike turned to these order and delivery platforms when in-person dining shuttered, their popularity continuing as pre-pandemic dining patterns returned slowly and unpredictably, if at all.

Tellingly, the global food delivery market soared from $26.9 billion in value in 2020 to $221.65 billion in 2022, according to Grand View Research. For America’s four dominant platforms, Doordash, Uber Eats, Uber-owned Postmates, and Grubhub, his buoyed hopes of profitability with a new stream of users and increased business volume. Grocery delivery service Instacart claimed it achieved its 2022 goals in the third week of the 2020 lockdown, a report from Business of Apps said.

In step with industry growth, and since January 2019, court interaction followed a general upwards trajectory. 

Usually, the platforms were on the defensive.

SoCal: The Most Popular Forum

Three of the four dominant firms have San Francisco, Calif. headquarters, with Chicago, Illinois-based Grubhub being the outlier. Yet Docket Alarm analytics reveal that the most common venue was Los Angeles County Superior Court, followed by the nation’s patent and trademark registrars and dispute arbiters.

Of the Los Angeles cases, the overwhelming majority were auto accident-related, which adds up, as the core business of these platforms involves their delivery drivers spending time on the road.

Factors contributing to the high accident rate could be the Los Angeles metropolitan area’s size, second largest behind New York City, its vast geographic spread, and its high population (also second largest behind New York City). In addition, research from Zippia reported that in major markets like New York City, California, and Washington, D.C., food delivery rates are 328% higher than the national average.

Antitrust Scrutiny

Though nowhere near as numerous, antitrust cases against the four major platforms have also formed part of the litigation picture. In part, this is due to the dramatic increase in demand that fueled a scramble for market share, and in turn, consolidation.

Doordash, a company which made a hot public debut in December 2020, has made multiple acquisitions, including Finland’s Wolt Enterprises OY for $8 billion in 2021 after buying Caviar for $410 million in 2019. Notably, Square purchased Caviar about five years earlier in a $90 million deal.

Likewise, rival Uber Technologies, owner of subsidiary UberEats, acquired Postmates in July 2020. 

Though all cleared regulatory hurdles with the exception of Uber’s 2020 bid to buy Grubhub, private litigants have taken aim at the industry. A Docket Alarm search revealed 172 cases tagged 410, or anti-trust for the top four players. 

For example, one docket is heating up in the Southern District of New York. In that 2020 class action, individuals allege violations of the Sherman Act, claiming that GrubHub, Uber, and Postmates unlawfully fixed prices for restaurant meals by entering into restrictive agreements with restaurants that precluded those eateries from charging lower prices off-platform.

After denying the defendants’ motion to dismiss last year, the Southern District’s Lewis A. Kaplan denied their bid to punt the consolidated cases to arbitration in March.

Governmental Pushback

In addition to antitrust scrutiny, the platforms have come under fire for alleged predatory pricing practices from the localities they operate in. As reported by Law Street Media, New York City, San Francisco, Washington D.C., and Massachusetts took issue with leading platforms’ pricing practices.

Like New York City, San Francisco pushed back on the platforms’ charges to restaurants. In response, the cities capped the percentage platforms could charge an eatery for use of their services. The platforms, in an atypical united front, pushed back on the cities’ laws as violative of their constitutional rights, including their right to engage in business free from government intervention.

The San Francisco suit ended after a new law passed, exempting platforms from the 15% cap on per-order fees provided they make certain concessions. Across the country, New York City’s motion to dismiss the case is pending.