DoorDash filed a lawsuit Wednesday over New York City’s recently passed law that requires third parties to provide restaurants with consumer information.
The legislation, approved by the New York City Council in late July, mandates delivery services share monthly customer information if the restaurant requests it. This includes names, phone numbers, email addresses, delivery addresses, and items ordered. The third party must provide a disclosure explaining what data is being shared with the restaurant, and customers may opt out of sharing information. The order goes into effect in December.
In the complaint, DoorDash describes the measure as an “unconstitutional law” that forces a “shocking and invasive intrusion of consumers’ privacy.”
“It is also an unconstitutional compulsion of speech in violation of the First Amendment, an unconstitutional taking of DoorDash’s valuable commercial information, an unconstitutional impairment of private parties’ contractual bargains, and a flagrant violation of other constitutional rights,” the court document states.
Tension between restaurants and third-party delivery services have intensified throughout the pandemic as government restrictions and lack of travel have pushed brands to accept delivery as a larger share of business. Operators have particularly taken issue with not having access to valuable customer data that fuels targeted 1:1 marketing. In response, several restaurants have turned to first-party platforms like Olo and Lunchbox in which consumers can order delivery through the concept’s app and website as opposed to the order originating on a third-party site. This not only gives brands access to information, but also cuts out high delivery fees, which have also been a major point of contention.
Andrew Rigie, executive director of the NYC Hospitality Alliance, was highly critical of DoorDash’s legal move.
“DoorDash spends millions of dollars to take restaurants’ customers and withhold their information so they can control the market and extract more fees from small businesses,” Rigie said in a statement. “This time the tech giant is spending more money, on another lawsuit, hoping to eliminate any common-sense regulation of their business after the City Council passed a widely supported law requiring them to provide restaurants with access to the restaurants’ own customer information. The Court should reject these claims as sour grapes and uphold the critical information sharing law that allows restaurants to connect directly with their own customers.”
DoorDash claims the ordinance will likely backfire. The third party envisions restaurants using its “trade secret data” to compete directly with it, forcing the delivery aggregator to modify services that will result in fewer resources to operators, fewer earnings for delivery couriers, and fewer choices for consumers.
“The City has made clear that the Ordinance’s purpose is to reduce DoorDash’s profitability—or remove DoorDash from the equation altogether—and to allow restaurants to free-ride on DoorDash’s confidential, commercially valuable data,” the lawsuit states. “The Ordinance reflects naked animus toward third-party platforms.”
The court filing comes shortly after DoorDash, Grubhub, Postmates, and Uber Eats sued New York City over its permanent cap on delivery fees. The group argues that costs of delivery and marketing will shift to consumers, which will in turn reduce order volume, lower restaurant revenues, decrease earnings for drivers, and cut the city’s tax revenue. DoorDash and Grubhub also filed a complaint against San Francisco, which implemented a permanent cap on fees during the summer.