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Uber Eats, DoorDash, Grubhub Sue NY City Over Fee Caps

Food-delivery apps seek to block a New York City law that caps the commissions that restaurants pay at 15%.

Shares of Uber Eats  (UBER) - Get Uber Technologies, Inc. Report, DoorDash  (DASH) - Get DoorDash Report and Grubhub  (GRUB) - Get Grubhub, Inc. Report were higher after the food-delivery companies sued New York City.

The trio are suing the city over legislation that would license them and cap the commissions they can charge restaurants. 

"Those permanent price controls will harm not only plaintiffs, but also the revitalization of the very local restaurants that the city claims to serve," the companies said in the lawsuit, filed late Thursday, according to Reuters. 

The companies petitioned the federal court in New York to issue an injunction preventing the city from enforcing the fee cap. The New York City Council approved the cap in August. 

The lawsuit alleges that the council's legislation is unconstitutional because "it interferes with freely negotiated contracts between platforms and restaurants by changing and dictating the economic terms on which a dynamic industry operates."

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The New York City Council during the pandemic issued temporary caps on the commissions the food-delivery companies could charge. The caps were made permanent in August's legislation. 

The council limited the charge to 15% of food orders for delivery services and 5% for advertising and other non-delivery services. 

DoorDash had a 36% market share of July sales in the city while Grubhub had 34% and Uber Eats and Postmates combined for 30%, according to a Bloomberg survey. 

San Francisco also has enacted permanent commission caps for the food delivery apps. 

At last check shares of DoorDash were rising 0.2% to $208.07 while Uber gained 0.9% to $40.71. Both are based in San Francisco. Grubhub is a unit of Just Eat of Amsterdam. The stock recently traded up 0.5% at $18.94.