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DoorDash sues NYC over data-sharing law, privacy concerns

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DoorDash is suing New York City over a controversial law enacted this summer that forces food delivery app companies to share customer data with restaurants, according to a complaint filed Wednesday.

Doordash and other delivery apps, including GrubHub and UberEats, fought against the bill before it was approved by the New York City Council on July 29, arguing that it raised serious consumer privacy concerns.

The law requires app companies to share customers’ names, phone numbers, delivery and mailing addresses and purchase histories with restaurants that request this data. But DoorDash argues that the law “does not mandate any data-security requirements once the customer data is transferred to restaurants,” according to the complaint filed in federal district court in Manhattan.

Some restaurants and consumer groups, including the New York Hispanic Chamber of Commerce, Tech: NYC and the National Gay and Lesbian Chamber of Commerce, also spoke out against the law, citing privacy concerns.

The goal of the measure, proponents on the City Council argued, was to give restaurants direct access to their customers: It’s not fair, they contend, for an app to take an order for a burger and fries at the corner diner, match that order with a delivery person and arrange for the meal to be delivered to the customer’s door — all without the restaurant ever knowing who its patron was.

Some restaurants and consumer groups are opposed to the NYC law that requires delivery companies to hand over customer data to restaurants.
REUTERS

The DoorDash complaint is the latest salvo between the delivery apps and the New York City Council, which has spearheaded a number of temporary laws aimed at reigning in the fees these companies charge, particularly during the pandemic when restaurants were largely reliant on delivery for their income. 

The apps charge restaurants a percentage of an order’s tape total. Under a City Council law passed last month, the app services would be limited in the amount they can charge restaurants to 15 percent of food orders for delivery services, 5 percent for advertising and other miscellaneous services and 3 percent for credit card processing fees. 

Mayor Bill de Blasio now has 30 days to sign the legislation, which would take effect 120 days after becoming law.

The contentious relationship between the delivery apps and New York City predated the pandemic.

A series of hearings were held in 2019, largely spearheaded by Councilman Mark Gjonaj (D-Bronx), who heads the council’s small business committee. Those hearings questioned the delivery apps’ business models, especially that of GrubHub’s, which came under fire for charging restaurants fees for delivery orders placed using telephone numbers that GrubHub paid for and advertised, often without their knowledge — but that weren’t associated with restaurants themselves.

The new law requires app companies to share customer data with restaurants that request it. But DoorDash argues that it “does not mandate any data-security requirements once the customer data is transferred to restaurants,” according to the complaint filed in federal district court in Manhattan.

It goes into effect in December and DoorDash is hoping to derail it before then.

The law requires the app companies to allow customers to opt-out of data sharing but if the customer does not opt-out when placing an order, consent is assumed.

The complaint is the second lawsuit against the Big Apple by the food delivery industry, which sued the city over another law capping the fees they charge restaurants for their services. Doordash and GrubHub also sued the city of San Francisco over the same fee cap issue.

Increasingly states and municipalities have been taking legal action against the delivery companies with the Massachusetts Attorney General suing the companies for what it says was allegedly illegally charging fees to Massachusetts restaurants that exceeded the statutory fee cap in place during the COVID-19  health emergency. Chicago also sued GrubHub and DoorDash in August over the consumer fees, alleging that they are deceptive and disclosed without the restaurants’ permission.

The New York City Council did not immediately respond for comment.

DoorDash insists that the new New York City data-sharing law is “likely to backfire,” according to the complaint.

“Restaurants will use DoorDash’s trade secret data to compete directly with DoorDash, forcing DoorDash to modify its services in a way that will result in fewer resources being offered to restaurants.”

DoorDash shares were up sharply in early trade Wednesday, rising more than 2.3 percent as the broader market was up only around 0.2 percent.

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