DASH, UBER: Food Delivery Giants Settle Lawsuit Over Fee Caps

DoorDash (DASH), Uber (UBER) Eats, and Grubhub have reached a settlement with New York City over a lawsuit regarding the delivery fee cap, marking the end of a legal battle that began in 2021. The settlement, filed in Manhattan federal court, opens the door for the food delivery giants to charge restaurants more than currently allowed.

Brief Background

New York City initially imposed the fee caps in May 2020 as a temporary move to support the struggling restaurants during the COVID-19 pandemic. The law limited delivery commissions to 15% and charges for advertising and other services to 5%. The city argued these caps were essential to prevent job losses caused by commissions as high as 30%.

In August 2021, NYC made the fee limits permanent, causing the delivery platforms to sue the next month. They said the cap hurt their right to set prices and cost them millions. In September 2023, Judge Gregory Woods rejected NYC’s request to end the lawsuit, allowing the case to proceed.

Settlement Depends on NYC Council’s Decision

Importantly, the agreement allows the companies to charge higher commissions only if the New York City Council includes the proposed changes to the existing law. If the law is changed, the lawsuit will be dismissed with prejudice, meaning the companies cannot refile the same claim.

While the settlement doesn’t immediately change fees, it paves the way for Uber Eats, DoorDash, and Grubhub to adjust their pricing, which could improve their profit margins.

Also, it could influence the decision of San Francisco and other cities with similar delivery fee restrictions.

Which Is Better, DASH or UBER?

According to the TipRanks Stock Comparison tool, UBER stock has a Strong Buy consensus rating, while DASH stock has a Moderate Buy. Also, analysts see more upside potential in Uber, over 18% in the next 12 months.