GrubHub (GRUB) - Get Report took a double hit Tuesday as the online-restaurant-delivery service was one of the subjects of an antitrust lawsuit filed in federal court while a top analyst slashed his price target on the company.
A lawsuit filed in federal court in Manhattan contends that GrubHub, along with Uber Eats, (UBER) - Get Report DoorDash and Postmates, have abused their monopoly power in the online meal delivery sector to charge restaurants high fees that are ultimately passed on to customers through higher menu prices.
GrubHub declined to comment.
The fees charged by GrubHub and the other big players in the field amount to 13.5% to 40% of revenue, according to the proposed class-action lawsuit.
Restaurant profits, by contrast, typically range from 3% to 9%, the lawsuit contends.
Consumers are also hit. The delivery services in their contracts require restaurants to charge the same for meals that are delivered to diners' doorsteps as for meals they would serve to customers in the restaurants, according to the lawsuit.
"Defendants’ fees are shocking when one considers how little value Defendants provide to restaurants and consumers," the lawsuit says.
"In contrast to platforms like American Express (AXP) - Get Report- which earns its 3.5% fees by offering consumers special products, experiences, benefits, exclusive membership services, and loyalty programs - Defendants merely offer a list of local restaurants that can easily be found on Google (GOOGL) - Get Report or Yelp (YELP) - Get Report for free."
Late last week the office of San Francisco Mayor London Breed issued an emergency order limiting food-delivery fees to restaurants at 15% of an order's total, SF Eater reported.
Meanwhile, analysts at Benchmark slashed their price target on GrubHub to $51 a share from $63.
Benchmark's new price target still represents a 25%-plus premium over its current trading price. But it's a bit more than half the $95-a-share target Benchmark set for GrubHub when it initiated coverage of the ordering platform last summer.
Shares of GrubHub at last check rose 4.6% to $41.50. U.S. stocks are indicated higher when trading opens.