Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 1 of 41
`
`MARIAM DAVITASHVILI, ADAM BENSIMON,
`and MIA SAPIENZA, individually and on behalf of
`all others similarly situated,
`
`v.
`
`Plaintiffs,
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`______________________________________________
`)
`) No. 1:20-cv-03000
`)
`)
`)
`)
`)
`) CLASS ACTION COMPLAINT
`)
`)
`) Jury Trial Demanded
`)
`)
`)
`) FILED VIA ECF
`Defendants.
`______________________________________________ )
`
`GRUBHUB INC. (a/d/b/a SEAMLESS),
`DOORDASH INC., POSTMATES INC., and
`UBER TECHNOLOGIES, INC., in its own right and
`as parent of wholly owned subsidiary UBER EATS,
`
`Plaintiffs Mariam Davitashvili, Adam Bensimon, and Mia Sapienza (together,
`
`“Plaintiffs”), individually and on behalf of all others similarly situated, by the undersigned
`
`attorneys, allege as follows for this Class Action Complaint against Defendants Grubhub Inc. (also
`
`doing business as Seamless) (“Grubhub”), DoorDash Inc. (“DoorDash”), Postmates Inc.
`
`(“Postmates”), and Uber Technologies, Inc. (“Uber”), in its own right and as parent of wholly
`
`owned subsidiary Uber Eats (“Uber Eats”). These allegations are made on information and belief,
`
`and pursuant to investigation by Plaintiffs’ counsel.
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 2 of 41
`
`NATURE OF THE CASE
`
`1.
`
`Defendants Grubhub, Uber and/or Uber Eats, Postmates, and DoorDash own and
`
`operate software platforms (the “Delivery Apps”) that digitally connect restaurants to consumers
`
`who want meal takeout or meal delivery.1 By providing consumers with a list of restaurants in
`
`their apps, Defendants promote themselves to restaurants as more than just an electronic
`
`transaction platform, but also a marketing service.
`
`2.
`
`Defendants obtained their monopoly power over both meal delivery consumers
`
`and restaurants in the relevant Geographic Submarkets2 by being first to market Online Meal
`
`Ordering Platforms in the various submarkets. Because of the Delivery Apps’ market control in
`
`the respective markets, consumers and restaurants have little choice but to do business with
`
`them. For example, in New York City Geographic Submarket, Grubhub has a whopping 66%
`
`marketshare of the Meal Delivery Market.3
`
`3.
`
`Defendants’ monopoly power in a Meal Delivery Market is reflected by their fees,
`
`which range from 13.5%–40% of revenues, even though the average restaurant’s profits range
`
`from 3%–9% of revenues. Defendants’ fees are shocking when one considers how little value
`
`Defendants provide to restaurants and consumers. In contrast to platforms like American
`
`Express—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 or Yelp for free. As TechCrunch put it in
`
`
`1 Hereinafter, “meal delivery” and “meal takeout” will be collectively referred to as “meal
`delivery.”
`
`2 This term as used herein is defined below.
`3 This term as used herein is defined below.
`
`2
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 3 of 41
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`a March 16, 2020 article, “the primary differentiation between delivery apps today is not based
`
`on innovations that meaningfully impact user experience, but instead comes down to a handful of
`
`restaurant brands with which the various apps are in a land grab to create exclusive delivery
`
`relationships.”4
`
`4.
`
`Unable to compete on anything that “meaningfully impact[s] user experience,”
`
`each Defendant instead uses its monopoly power in the meal delivery market to prevent
`
`competition and limit consumer choice. Specifically, Defendants use their market power to
`
`impose unlawful price restraints in their merchant contracts, which have the design and effect of
`
`restricting price competition from competitors in order to maintain the Delivery Apps’ market
`
`share.
`
`5.
`
`In their form contracts with restaurants, Defendants include clauses requiring
`
`uniform prices for restaurants’ menu items throughout all purchase platforms (the “No Price
`
`Competition Clause” or “NPCC”). The NPCCs prevent restaurants from charging different
`
`prices to meal delivery customers than they charge to dine-in customers for the same menu
`
`items. The purpose and effect of the No Price Competition Clause is to act as an unlawful price
`
`restraint that prevents restaurants from gaining marketshare and increased profitability per
`
`consumer by offering lower prices to consumers. The NPCCs target and harm not only
`
`restaurants, but also two distinct classes of consumers: (1) consumers who purchase directly
`
`from restaurants in the Meal Delivery Market; and (2) consumers who buy their meals in the
`
`separate and distinct restaurant Dine-In Market.5 Both restaurants and consumers would benefit
`
`absent Defendants’ unlawful restraints,
`
`
`4 See https://techcrunch.com/2020/03/16/the-hidden-cost-of-food-delivery/. All URL links cited
`herein are current as of April 10, 2020.
`5 This term as used herein is defined below.
`
`3
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 4 of 41
`
`6.
`
`The rise of the four Defendants has come at great cost to American society.
`
`Defendants offer restaurants a devil’s choice: in exchange for permission to participate in
`
`Defendants’ Meal Delivery monopolies, restaurants must charge supra-competitive prices to
`
`consumers who do not buy their meals through the Delivery Apps,6 ultimately driving those
`
`consumers to Defendants’ platforms. Unable to offer consumers the increased choice of paying
`
`better prices to dine-in, restaurants have seen precious dine-in customers slip away year after
`
`year.
`
`7.
`
`Defendants’ NPCCs work by forcing Direct and Dine-In consumers to shoulder
`
`Defendants’ exorbitant economic rents. While both meals sold through Defendants’ platforms
`
`and directly from the restaurant share the same costs and overhead, meals sold through the
`
`Delivery Apps are more expensive, because of Defendants’ high fees. Restaurants must calibrate
`
`their prices to the more costly meals served through the Delivery Apps in order to not lose
`
`money on those sales. Defendants’ unlawful NPCCs then force restaurants to also charge those
`
`higher prices to Dine-In and Direct Consumers, even though the cost of those consumers’ meals
`
`are lower as they do not include Defendants’ exorbitant fees.
`
`8.
`
`Absent Defendants’ unlawful restraints, restaurants could offer consumers lower
`
`prices for direct sales, because direct consumers are more profitable. This is particularly true of
`
`Dine-In consumers, who purchase drinks and additional items, tip staff, and generate good will.
`
`Restaurants cannot offer Plaintiffs and the class this lower cost option, because the Delivery
`
`Apps’ No Price Competition Clauses prevent them from doing so.
`
`
`6 These include consumers who purchase their delivery meals directly from the restaurant via
`the restaurant’s website or app, or via telephone (“Direct” consumers); as well as consumers who
`Dine-In.
`
`4
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 5 of 41
`
`9.
`
`If consumers were offered discounts for Direct sales, they would buy most of their
`
`Delivery Meals directly. Since consumers have a limited number of restaurants available to
`
`them that are within their delivery range, cuisine preference, and price preference, consumers
`
`rarely discover new restaurants when they order food delivery. Instead, once a consumer
`
`discovers that they like, for example, the famous khachapuri at Cheeseboat restaurant, they are
`
`likely to reorder that item again and again. Even a small discount reflecting the decreased cost of
`
`Direct sales would drive direct purchases because of the substantial savings to those consumers
`
`over time, creating benefits to both the restaurant and the consumer.
`
`10.
`
`Unable to compete on the basis of price due to Defendants’ unlawful restraints,
`
`restaurants have seen their precious Dine-In market cannibalized by Defendants’ Delivery Apps.
`
`Plaintiffs bring this claim for relief on behalf of all Americans who would still to enjoy a nice
`
`dinner out with their family before Defendants make that impossible.
`
`A.
`
`Plaintiffs
`
`PARTIES
`
`11. Mariam Davitashvili resides in New York State. Ms. Davitasvhili is a consumer
`
`who purchased Dine-In and Direct meals in New York City restaurants that are contracted with
`
`the Delivery Apps.
`
`12.
`
`Adam Bensimon resides in New York State. Mr. Bensimon is a consumer who
`
`purchased Dine-In and Direct meals in restaurants in New York, NY, Boston, MA, New Orleans,
`
`LA, Philadelphia, PA, and Portland, ME that are contracted with the Delivery Apps.
`
`13. Mia Sapienza resides in New York State. Ms. Sapienza is a consumer who
`
`purchased Dine-In and Direct meals in restaurants in New York, NY, Boston, MA, Los Angeles,
`
`CA, Philadelphia, PA, and Washington DC that are contracted with the Delivery Apps.
`
`
`
`5
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 6 of 41
`
`B.
`
`Defendants
`
`DoorDash
`
`14.
`
`Defendant DoorDash Inc. (“DoorDash”) is located at 901 Market St., Suite 600,
`
`San Francisco, California. DoorDash describes itself as “enabl[ing] delivery in areas where it
`
`was not available” and “empower[ing] small business owners to offer delivery in an affordable
`
`and convenient way” “by enabling restaurant food delivery.” DoorDash states that it has
`
`partnered with more than 300,000 restaurants in more than 4,000 cities in the U.S. and Canada.
`
`In addition to countless local partner restaurants, national partners include McDonald’s, and
`
`Wendy’s.
`
`15.
`
`DoorDash boasts that it has the top Delivery App market share in North America,
`
`with 80% consumer reach. According to a Nov. 13, 2019 report by Bloomberg, DoorDash
`
`comprises 35% of consumer spending in the food delivery category in the U.S.7 DoorDash does
`
`not regularly publicly disclose its financials; however, a December 4, 2019 report from The
`
`Information estimated its net revenue for that year at $900 million to $1 billion.8 On February
`
`27, 2020, DoorDash announced it had confidentially submitted a draft registration statement with
`
`the U.S. Securities and Exchange Commission (“SEC”) concerning a proposed initial public
`
`offering.9 On April 4, 2020, The Economist reported DoorDash’s valuation at $13 billion.10
`
`
`7 See https://www.bloomberg.com/news/articles/2019-11-13/doordash-picks-up-another-100-
`million-at-nearly-13-billion-valuation
`8 See https://www.theinformation.com/articles/with-public-debut-looming-doordash-projected-
`450m-2019-loss
`9 See https://www.prnewswire.com/news-releases/doordash-announces-confidential-submission-
`of-draft-registration-statement-for-proposed-initial-public-offering-301012714.html
`10 See https://www.economist.com/briefing/2020/04/04/technology-startups-are-headed-for-a-
`fall
`
`6
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 7 of 41
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`16.
`
`DoorDash takes a “commission” from restaurants for processing orders that
`
`ranges from 10%–25%.11
`
`Grubhub
`
`17.
`
`Defendant Grubhub Inc. (a/d/b/a Seamless) (“Grubhub”) is located at 111 W.
`
`Washington St., Suite 2100, Chicago, Illinois. Grubhub describes itself as an online and mobile
`
`food-ordering and delivery marketplace. Grubhub states that it has partnered with more
`
`than155,000 restaurants in over 3,200 U.S. cities and London. The Grubhub portfolio of brands
`
`includes Grubhub, Seamless, LevelUp, AllMenus and MenuPages.
`
`18.
`
`Grubhub’s power in U.S. markets is growing exponentially. As reported in
`
`Grubhub’s press release, dated February 5, 2020, it was able to double its restaurant selection in
`
`the fourth quarter of 2019 over the prior quarter. In 2019, Grubhub reported revenues of $1.3
`
`billion, a 30% increase over year prior.12
`
`19.
`
`Grubhub takes a “marketing commission” from restaurants for processing orders
`
`that ranges from 13.5%–40%.
`
`Postmates
`
`20.
`
`Defendant Postmates Inc. (“Postmates”) is located at 201 3rd St., Floor 2, San
`
`Francisco, California. Postmates describes itself as “transforming the way goods move around
`
`cities by enabling anyone to have anything delivered on-demand,” a mission that it seeks to
`
`fulfill through its “revolutionary Urban Logistics platform connect[ing] customers with local
`
`couriers who can deliver anything from any store or restaurant in minutes [and] empower[ing]
`
`business through our API [application program interface] to offer delivery.” Postmates states
`
`
`11 See https://appinstitute.com/doordash-commission/
`12 See https://investors.grubhub.com/investors/press-releases/press-release-
`details/2020/Grubhub-Reports-Fourth-Quarter-And-Full-Year-2019-Results/default.aspx
`
`7
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 8 of 41
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`that it has partnered with more than 75,000 restaurants in more than 4,200 cities in the U.S. In
`
`addition to countless local partner restaurants, national partners include Popeyes.
`
`21.
`
`Postmates claims that it is able to reach 80% of U.S. households, and is “#1 In
`
`Guest Spend.” According to Second Measure, Postmates is the fourth-largest Delivery App
`
`(after DoorDash, Grubhub, and Uber Eats), earning 10 percent of U.S. meal delivery consumer
`
`spending in February 2020.13 Postmates does not regularly publicly disclose its financials;
`
`however, a May 22, 2019 report from The Information estimated its net revenue for the prior
`
`year at $400 million.14 Postmates was expected to go public in late 2019, but has yet to do so. A
`
`November 19, 2019 report from Barron’s put its valuation at $2.4 billion.15
`
`22.
`
`Postmates takes a “commission” from restaurants for processing orders that
`
`ranges from 15%–30%.16
`
`Uber Eats
`
`23.
`
`Defendant Uber Eats (“Uber Eats”) is a wholly owned subsidiary of Defendant
`
`Uber Technologies, Inc. (“Uber”), and is located at 1455 Market St., 4th Floor, San Francisco,
`
`California. Uber describes Uber Eats as “benefiting . . . consumers [by] provid[ing r]estaurants
`
`with an instant mobile presence and efficient delivery capability.” Uber reports that Uber Eats
`
`has partnered with more than 100,000 restaurants in 6,000 cities internationally. In addition to
`
`countless local partner restaurants, national partners include Starbucks.
`
`
`13 See https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-
`doordash-postmates/
`14 See https://www.theinformation.com/articles/what-uber-tells-us-about-a-postmates-ipo
`15 See https://www.barrons.com/articles/food-delivery-grubhub-doordash-and-uber-eats-
`51573859107
`16 See https://appinstitute.com/postmates-commission/
`
`8
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 9 of 41
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`24.
`
`According to Second Measure, Uber Eats is the fourth-largest Delivery App (after
`
`DoorDash and Grubhub), earning 20 percent of U.S. meal delivery consumer spending in
`
`February 2020.17 In January 2020, Uber reported that Uber Eats’ net revenues in 2019 were
`
`$1.38 billion, an 82% increase over year prior.18
`
`25.
`
`Uber Eats takes a “fee” from restaurants for processing their orders that ranges
`
`from 20%–30%.19
`
`JURISDICTION
`
`26.
`
`This Court has subject matter jurisdiction based on 28 U.S.C. §§ 1331 and
`
`1337(a) and 15 U.S.C. § 15.
`
`27.
`
`Venue is proper in this judicial district under 15 U.S.C. § 22 and 28 U.S.C.
`
`§§ 1391(b) and (c), because Defendants transact business within this district and the interstate
`
`trade and commerce described in this complaint is carried out, in substantial part, in this district.
`
`Venue is particularly appropriate in this district because New York City consumers have been
`
`particularly victimized by Defendants’ conspiracy.
`
`A. Restaurant Economics
`
`BACKGROUND
`
`28.
`
`Restaurants in the United States operate in a challenging economic environment
`
`where even successful restaurants experience slim, and diminishing profit margins. As recently
`
`as two decades ago, average restaurant profit margins were much higher. For example, in
`
`
`17 See https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-
`doordash-postmates/
`18 See https://s23.q4cdn.com/407969754/files/doc_financials/2019/ar/Uber-Technologies-Inc-
`2019-Annual-Report.pdf
`19 See https://appinstitute.com/uber-eats-commission/
`
`9
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 10 of 41
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`Philadelphia, Pennsylvania, restaurant profit margins had been a robust 15%–20%, according to
`
`a July 25, 2018 article by Philadelphia magazine; today, profit margins in Philadelphia have
`
`shrunk to 4%–7%.20
`
`29.
`
`The Restaurant Industry Operations Report published by The National Restaurant
`
`Association and Deloitte & Touche LLP, reports that average pre-tax profit margins for
`
`restaurants in the United States range from 2%–6% (2% for Full Service and 6% for Limited
`
`Service restaurants).21
`
`30.
`
`Restaurants may broadly be categorized into four categories: full service, fast
`
`food/quick service, food trucks, and catering, with the first three competing in the food delivery
`
`market. Full service restaurants generally experience profits margins22 of 3%–5%, while quick
`
`service restaurants and food trucks have average margins of 6%–9%.
`
`31. While costs vary, restaurant industry experts state that almost two-thirds of
`
`restaurant operational costs are in overhead for such items as rent, employee costs, and utilities.23
`
`The graphic on the following page from Lightspeed, a point-of-sale company,24 illustrates this:
`
`
`20 See https://www.phillymag.com/foobooz/2018/07/25/restaurant-profit-margins-philly/
`21 See https://www.rrgconsulting.com/ten-restaurant-financial-red-flags.html
`22 See https://upserve.com/restaurant-insider/profit-margins/
`23 See https://www.restaurantowner.com/public/Restaurant-Rules-of-Thumb-Industry-Averages-
`Standards.cfm
`24 See https://lightspeedhq.com/blog/complete-guide-to-restaurant-profit-margins/
`
`10
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 11 of 41
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`■ Cost of goods sold (COGS)
`
`■ Laborexpenses
`
`Overhead expenses
`
`■ Netprofit
`
`
`
`32.
`
`The Dine-In Market is essential for restaurant economic health, as described by
`
`restaurant industry consultant Rewards Network:
`
`Restaurant In On-premise dining sales are the bread and butter of most
`restaurants, and it’s important for restaurants to ensure that their dine-in
`business remains a strong income source, even as delivery orders soar.
`
`
`Dine-in visits tend to account for the most positive guest experiences
`because the restaurant is able to provide the highest level of service, food,
`and atmosphere. Unlike delivery or takeout orders, owners and managers
`are able to address any negative issues that arise during a customer’s meal
`in real time. Not only that, it’s easier to boost margins through upsells when
`patrons dine in, especially when it comes to alcohol sales.25
`B. Market Descriptions
`
`The Meal Delivery Market
`
`33. Meal delivery markets are distinct two-sided markets defined by geographic area,
`
`where one side is comprised of restaurants that sell meals and beverages to be delivered to the
`
`other side, consumers who ordered those items.
`
`
`25 See https://www.rewardsnetwork.com/blog/dine-in-delivery-takeout/
`
`11
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 12 of 41
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`34.
`
`The relevant meal delivery markets for the purposes of this action are New York
`
`City, Los Angeles, Chicago, Dallas-Fort Worth, Houston, Washington DC, Miami, Philadelphia,
`
`Atlanta, Boston, Phoenix, San Francisco, or any other Geographic Submarket (the “Geographic
`
`Submarkets”) where Defendants unlawfully exert their market power, as described herein (the
`
`“Meal Delivery Markets”).
`
`Online Meal Ordering Platforms
`
`35.
`
`Beginning in the early 2000s, Online Meal Ordering Platforms (“OMOP”) began
`
`to gain popularity due to the advent of smartphones and the increased convenience offered by
`
`online ordering. OMOPs are two-sided transactional platforms that allow restaurants and
`
`consumers to engage in online transactions to facilitate meal and beverage delivery.
`
`36.
`
`Beginning in the early 2010s, the OMOPs began to overtake more and more of
`
`the nationwide meal delivery market, replacing ordering by telephone. On July 14, 2015, Quartz
`
`reported that “Online food delivery ordering is about to overtake phone ordering in the US,”
`
`observing:
`
`In the year ended May 2010, approximately 1.39 billion phone delivery orders were
`placed in the US, according to market research firm NPD. By May 2015, that
`number had dropped to about 1.02 billion. In the same period, online orders more
`than doubled from approximately 403 million to nearly 904 million.
`
`GrubHub launched its services in 2004, and has benefitted from both the early start
`and the change in ordering preferences. Seamless, which began offering consumers
`online ordering in 2005, merged with GrubHub in 2013, and the company now
`includes MenuPages and allmenus as well. But while GrubHub had a “first mover
`advantage,” according to a report from Cowen and Company, startups are eating
`away at it—despite its massive network of more than 30,000 restaurants—because
`consumers are increasingly looking for higher quality food options.
`
`Services like UberEATS, Caviar, Postmates, and DoorDash are providing delivery
`services for restaurants that don’t have their own, upgrading customers’ dinner
`
`12
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 13 of 41
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`choices from the typical pizza, sushi and Chinese food to include more artisanal,
`freshly prepared, and lovingly packed meal options.26
`
`37.
`
`Since their inception, the OMOPs have been highly concentrated in any given
`
`geographic market with the two largest competitors controlling the majority of market share
`
`nationwide, as illustrated by the following graph from a March 24, 2020 report by Second
`
`Measure 27:
`
`Meal Delivery - U.S. Monthly Consumer Sales
`
`200
`
`·111 150
`.!!
`C
`VI
`VI
`::::, 100
`"'C
`~
`X
`~
`"'C
`C
`
`50
`
`2019
`2018
`2020
`• Indexed to meal delivery Jon. 2018 soles (=100) Includes soles from all companies'
`subsidiaries except Grubhub's LevelUp. Percentages rounded.
`
`February 2020
`Share of Sales
`
`Uber Eats 20%
`Does not include purchases made
`with Uber Cash. Some sales
`indistinguishable from Uber rides,
`especially in May-August 2019 .
`
`Postmates 10%
`
`DoorDash 39%
`
`2%
`Other
`Amazon Restaurants
`(pnor to Jun '19 closure)
`Caviar (prior to Oct '19 acquisition)
`Waitr
`
`Grubhub
`
`30%
`
`Second Measure
`
`
`
`38.
`
`In the early years of the OMOP market, Defendants did not compete on the basis
`
`of price, but instead saw the new OMOP market as a gold rush where each attempted to sign up
`
`the best available restaurants. This was a logical strategy as there was no reason to engage in
`
`
`26 See https://qz.com/452609/online-food-delivery-ordering-is-about-to-overtake-phone-
`ordering-in-the-us/
`27 See https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-
`doordash-postmates/. Defendants’ market share is actually higher than represented by the graph.
`Second Measure notes: “Purchases made through LevelUp, which Grubhub acquired in late
`2018, are not included in our analysis. Neither are college student meal plan purchases made
`through Grubhub subsidiary Tapingo.”
`
`13
`
`

`

`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 14 of 41
`
`price competition when they could simultaneously increase profits and market share simply by
`
`signing up restaurants that did not use an OMOP.
`
`39.
`
`Unconstrained by competition, Defendants have experienced explosive growth.
`
`As Second Measure observed in its March 24, 2020 report:
`
`Although coronavirus-related sales spikes weren’t yet detected in February, sales
`across the industry did increase 28 percent year-over-year. And DoorDash’s
`growth continues to stand out. The company saw an unparalleled 85 percent year-
`over-year jump in February.
`
`40. While Defendants continue growth in new markets, they have already carved
`
`America’s largest cities, according to Second Measure:
`
`Meal Delivery - February 2020 Share of Sales
`
`Top metro areas
`by population
`
`Grubhub DoorDash Uber Eats Postmates
`
`New York City
`
`66%
`
`Los Angeles
`
`Chicago
`
`37%
`
`Dallas-Fort Worth
`
`Houston
`
`Washington DC
`
`21%
`
`Miami
`
`Philadelphia
`
`Atlanta
`
`Boston
`
`40%
`
`Phoenix
`
`San Francisco
`
`16%
`
`65%
`
`- - - - -
`
`14%
`
`~
`38%
`
`16%
`
`34%
`
`23%
`
`6%
`
`31%
`
`27%
`
`28%
`
`6%
`
`18%
`
`54%
`
`38%
`
`9%
`
`·30%
`
`25%
`
`22%
`
`21%
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`Second Measure
`
`
`
`41.
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`Importantly, Defendants do not share market power equally in each Geographic
`
`Submarket. Instead, most markets are dominated by one or two of the Defendants. The
`
`monopolists in each Geographic Submarket enjoy naturally high barriers to entry from each
`
`other because, as transactional two-sided markets, Defendants enjoy very powerful network
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`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 15 of 41
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`effects. Network effects occur when the value of a market is increased by the additional users in
`
`that market. In the case of OMOPs, the more consumers they have, the more restaurants they
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`can lure, thus enabling them to lure more consumers, and so on.
`
`42.
`
`These barriers to entry protect Defendants from each other. For example,
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`DoorDash, while the largest OMOP in the United States, has only 15% market share in New
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`York City. This is because in New York City, both consumers and restaurants know they will
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`benefit from the enhanced network effects of a large network like that of Grubhub (including
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`Seamless), and there is little benefit to using DoorDash which has both substantially fewer
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`consumers and restaurants in New York City. The costs of building brand and building a
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`network in New York City would thus be relatively high to DoorDash.
`
`43.
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`However, one group of competitors is not subject to these barriers to entry—the
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`restaurants themselves. With numerous cheaper OMOP out-of-box solutions available, the
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`restaurants are horizontal competitors with Defendants for the food delivery business. The
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`restaurants can offer a nearly identical product as Defendants with the same transactional
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`functionality, the same user ease, and results in the same delicious meal for the consumer.
`
`44.
`
`Unlike other two-sided transactional marketplaces, whatever marketing benefit
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`gained by both the consumer and the restaurant when they use the Defendants’ platform for the
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`first time is lost. For the second transaction between them, and every one thereafter, neither the
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`restaurants nor consumers gain anything special from using Defendants’ platforms to effectuate
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`their transaction. The limited geography of OMOP markets means, by definition, consumers will
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`become familiar with the restaurant offerings both within their pallet and delivery range.
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`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 16 of 41
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`45.
`
`The OMOP market generated over $94 billion in revenues in 2019. The OMOP
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`market was projected to have a revenue volume of almost $130 billion by 2023 even before the
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`Covid-19 crises. 28
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`Direct Sales Market
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`46.
`
`The Direct Sales Market includes all sales made directly from a restaurant,
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`including Dine-In, or delivery or takeout orders made over the phone, through the restaurant’s
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`app or website.
`
`47.
`
`In order to sell meals directly, numerous out-of-box solutions are available to
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`restaurants to create high quality apps and websites. For example, AppInstitute offers restaurants
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`the option to have their own digital ordering technology for as low as $44/month.
`
`48.
`
`Toast, which is used by tens of thousands of restaurants worldwide, boasts that it
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`can save restaurants a whopping 13% of their revenues as compared to using Grubhub, and
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`offers loyalty programs.29 Similarly, competitor AppInstitute offers options as inexpensive as
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`$66/month, a restaurant may have its own ordering website and app.30 ChowNow enables online
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`orders, commission free, for as low as $99/month.31
`
`49.
`
`Recently, and in just a matter of months, a startup OMOP called Project
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`Quarantine—a reference to the Covid-19 quarantine—has captured 2,500 restaurant partners.
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`Project Quarantine’s secret is that it provides all of the functionality that Defendants do, but for
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`free.
`
`
`28 See https://www.qsrmagazine.com/technology/fighting-share-166-billion-delivery-app-market
`
`29 See https://pos.toasttab.com/about
`30 See https://appinstitute.com/pricing/
`31 See https://get.chownow.com/pricing
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`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 17 of 41
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`Dine-In Market
`
`50.
`
`Like the Meal Delivery Market, the market for in-restaurant dining is comprised
`
`of numerous geographically distinct submarkets in cities and towns across the United States (the
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`“Dine-in Market”).
`
`51.
`
`Defendants acknowledge that the Dine-in Market is a distinct market from the
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`Meal Delivery Market. For example, in its October 29, 2019 letter to shareholders, Grubhub
`
`implied that restaurant overhead, an obvious component of the economics of the Dine-in Market,
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`is not part of the Meal Delivery Market: “Restaurants profit because their incremental sales from
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`Grubhub orders are greater than the incremental cost of food and demand generation fee paid to
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`Grubhub.”
`
`52.
`
`Similarly, in an interview with MarketWatch published on March 23, 2020,
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`Grubhub CEO Matt Maloney responded to a question thusly:
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`[MarketWatch]: Can restaurants survive on deliveries alone?
`
`Maloney: Not in the long-term. The industry isn’t large enough for all restaurants
`to survive just on delivery, but they can survive for a matter of weeks potentially.
`It’s definitely not a long-term solution to bridge across restaurants.32
`
`Echoing GrubHub’s comments, Uber boasts in its 2019 annual report that Uber
`
`53.
`
`Eats “generates incremental demand and improves margins for [r]estaurants by enabling them to
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`serve more consumers without increasing their existing front-of-house expenses.” And
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`DoorDash’s webpage targeting potential restaurant partners promises: “Your restaurant will be
`
`
`32 See https://www.marketwatch.com/story/restaurants-wont-be-able-to-survive-on-delivery-
`only-says-grubhub-ceo-matt-maloney-2020-03-21 (the “March 23, 2020 Maloney Interview”).
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`Case 1:20-cv-03000-LAK Document 1 Filed 04/13/20 Page 18 of 41
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`seen by millennials, parents, and even companies who need catering – all without the costs of a
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`dine-in experience.”33
`
`54. Most recently, the Covid-19 pandemic has annihilated the Dine-in Market, as the
`
`quarantines advocated by local, state, and federal government officials categorically precludes
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`participation in the Dine-in Market. In the next three months, 5 to 7 million servers, cooks,
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`dishwashers, managers and others in the meal and beverage industry are expected to be laid off
`
`according to the National Restaurant Association. The industry as a whole is expected to take a
`
`$225 billion loss over that time.34
`
`Defendants’ Restraints Have Contributed To The Demise of American Restaurant Culture
`
`55.
`
`Defendants’ Delivery Apps have been cannibalizing the Dine-in Market since
`
`their inception. As The Atlantic observed on August 2, 2019:
`
`But another turn is coming: In 2020, more than half of restaurant spending is
`projected to be “off premise”—not inside a restaurant. In other words, spending on
`deliveries, drive-throughs, and takeaway meals will soon overtake dining inside
`restaurants, for the first time on record. According to the investment group Cowen
`and Company, off-premise spending will account for as much as 80 percent of the
`industry’s growth in the next five years.
`
`56.
`
`On November 9, 2019, research group NPD observed, “since 2014 [] total
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`visits to restaurants have declined more than 700 million visits.”35
`
`The Delivery Labor Market
`
`57.
`
`In order to maintain their monopoly over the Meal Delivery Market, in certain
`
`Geographic Submarkets the Delivery Apps also sought to monopolize the labor market for
`
`
`33 See https://get.doordash.com
`34 See March 23, 2020 Maloney Interview.
`35 See https://www.npd.com/wps/portal/npd/us/news/press-releases/2019/when-it-comes-to-
`eating-patterns-in-america-the-more-things-appear-to-stay-the-same-the-more-they-change/
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`18
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`Case 1:20-cv-