In early July, the New York Post obtained a letter from a city councilman asking the Attorney General for the opening of an antitrust investigation into Grubhub. Although DoorDash dominates the U.S. third party delivery market, Grubhub controls up to 69 percent of the entire market in NYC.
The city councilman, Mark Gjonaj, said that the “time may have come” to revisit the terms of a 2013 settlement agreement that allowed Grubhub to absorb
This news comes in the wake of heavy public scrutiny of Grubhub. In June, the City Council held a hearing on Grubhub’s excessive fees. Council members questioned executives about their near 30% fees and their charges for thousands of dollars in commissions for phone call orders that never happened.
During this hearing, antitrust lawyer Gregory Frank testified that Grubhub has “substantial monopoly power in the highly concentrated New York City online ordering marketplace.” Frank says that this gives Grubhub leverage over the delivery business, which is separate from the ordering business.
“If they’re using the monopoly power in the online ordering business to enhance their market power in the delivery business,” Frank told the New York Post, “it seems that could potentially be illegal and be a cause for regulators to be involved.”
In terms of the potential investigation outcome, it’s all uncertain (especially considering competitors like Uber Eats and Postmates are gaining New York market share).
A federal Small Business Administration official and the New York State Liquor Authority have also expressed similar concerns over Grubhub’s power over restaurants. The official has said that Grubhub’s fees have grown to the point that they endanger repayment of SBA-backed loans. And the New York State Liquor Authority has
Besides all the talk of antitrust investigating, a report also alleged that GrubHub has quietly bought over 23,000 web domains in restaurants’ names without their knowledge or permission. These microsites include basic restaurant information with slightly tweaked phone numbers and links that would allow Grubhub to charge commissions on any orders placed through them. Grubhub has since insisted that contracts enable them to do this, but it is clear that Grubhub is making an effort to position themselves between customers and restaurants out of personal interest. Grubhub is currently facing various lawsuits for their work with microsites, and it’s safe to say that they will continue to find themself in hot water with restaurants and lawmakers.