Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 1 of 56
`Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 1 of 56
`
`EXHIBIT 1
`
`EXHIBIT 1
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 1 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 2 of 56
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`MARIAM DAVITASHVILI, ADAM
`BENSIMON, MIA SAPIENZA, PHILIP
`ELIADES, JONATHAN SWABY, JOHN
`BOISI, NATHAN OBEY, and MALIK
`DREWEY, individually and on behalf of all
`others similarly situated,
`
`
`Plaintiffs,
`
`
`v.
`
`GRUBHUB INC., UBER TECHNOLOGIES,
`INC., and POSTMATES INC.,
`
`
`Defendants.
`
`
`
`Civ. No. 1:20-cv-03000-LAK
`
`JURY TRIAL DEMANDED
`
`
`
`AMENDED CONSOLIDATED CLASS ACTION COMPLAINT
`
`Plaintiffs, Mariam Davitashvili, Adam Bensimon, Mia Sapienza, Philip Eliades, Jonathan
`
`Swaby, John Boisi, Nathan Obey, and Malik Drewey, individually and on behalf of all others
`
`similarly situated, bring this action against Grubhub Inc. (“Grubhub”), Uber Technologies, Inc.
`
`(“Uber”), and Postmates Inc. (“Postmates”) and allege as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`Defendants have violated Section 1 of the Sherman Act and its state analogues by
`
`exploiting, without procompetitive justification, their dominant position in the market for delivery
`
`and takeout through internet-based platforms that aggregate the offerings of multiple restaurants.
`
`2.
`
`Over the past decade, as smart phones have become ubiquitous, the popularity of
`
`these platforms has skyrocketed. Because most restaurants face low profit margins, they require
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 2 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 3 of 56
`
`
`
`
`
`
`
`significant volume to cover their costs. To achieve such volume, restaurants must sell through
`
`Defendants’ platforms, which each have tens of millions of active users.
`
`3.
`
`Defendants use their market power to force any restaurant that sells goods on
`
`Defendants’ platforms to pay unreasonable commissions, typically equal to 30% of every order,
`
`each time a consumer orders from that restaurant through the platform. These commissions are so
`
`large that, when restaurants sell through Defendants’ platforms, they must increase their prices just
`
`to avoid losing money on each sale.
`
`4.
`
`In a freely competitive market, these restaurants could offset these increased costs
`
`by increasing prices for consumers who choose the convenience of Defendants’ platforms, while
`
`maintaining lower prices for consumers who order directly from the restaurants. That is, these
`
`restaurants would offer their customers different prices depending on whether they used
`
`Defendants’ platforms or placed orders directly through the restaurant.
`
`5.
`
`Insulating their platforms, however, each Defendant prevents the restaurants by
`
`contract from offering lower prices for sales outside its platform. For each Defendant, these
`
`restrictions apply to direct orders from the restaurants for takeout, delivery, or dine-in meals, even
`
`if those consumers do no business with Defendants. Grubhub and Uber apply these contractual
`
`restrictions most broadly by also preventing restaurants from charging lower prices for orders
`
`through similar platforms, such as Doordash.
`
`6.
`
`Defendants do this because if the restaurants were to offer consumers lower prices
`
`for sales outside each Defendant’s platform, then the restaurants’ sales on the platform would
`
`decrease, and Defendants’ supracompetitive profits would be threatened.
`
`7.
`
`The contractual restrictions that Defendants impose on restaurants thus prevent
`
`both restaurants and other platforms from competing on price with Defendants. As a result of
`
`
`
`2
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 3 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 4 of 56
`
`
`
`
`
`
`
`Defendants’ conduct, any restaurant using any Defendant’s platform charges all of its customers
`
`supracompetitive prices.
`
`8.
`
`These agreements thereby cause substantial anticompetitive harm that, including
`
`with respect to the millions of consumers who are not even using Defendants’ platforms, lacks
`
`procompetitive justification. Indeed, although the courts in this country have not yet had occasion
`
`to do so, European regulators have repeatedly concluded that nearly identical contractual
`
`restrictions cause anticompetitive harm. In fact, bans on such provisions have resulted in lower
`
`prices for consumers.
`
`9.
`
`Accordingly, on behalf of a nationwide class of the customers of restaurants using
`
`these platforms, Plaintiffs seek to redress and enjoin Defendants’ unlawful conduct, occurring
`
`from April 13, 2016, to the present (the “Class Period”).
`
`II.
`
`PARTIES
`
`a. Plaintiffs
`
`10.
`
`Plaintiff Mariam Davitashvili is a resident and citizen of New York. Over the
`
`relevant period, she has ordered meals for takeout, delivery, and dine-in directly from restaurants
`
`that sell their goods through Defendants’ platforms.
`
`11.
`
`Plaintiff Adam Bensimon is a resident and citizen of New York. Over the relevant
`
`period, he has ordered meals for takeout, delivery, and dine-in directly from restaurants that sell
`
`their goods through Defendants’ platforms.
`
`12.
`
`Plaintiff Mia Sapienza is a resident and citizen of New York. Over the relevant
`
`period, she has ordered meals for takeout, delivery, and dine-in directly from restaurants that sell
`
`their goods through Defendants’ platforms.
`
`
`
`3
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 4 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 5 of 56
`
`
`
`
`
`
`
`13.
`
`Plaintiff Phil Eliades is a resident of New York, New York, and a citizen of New
`
`York. Over the relevant period, he has placed orders for takeout, delivery, and dine-in directly
`
`from restaurants that sell their goods through each Defendant’s platform, and indirectly from such
`
`restaurants through Doordash.
`
`14.
`
`Plaintiff Jonathan Swaby is a resident of New York, New York, and a citizen of
`
`New York. Over the relevant period, he has placed orders for takeout, delivery, and dine-in
`
`directly from restaurants that sell their goods through each Defendant’s platform, and indirectly
`
`from such restaurants through Doordash.
`
`15.
`
`Plaintiff John Boisi is a resident of Brooklyn, New York, and a citizen of New
`
`York. Over the relevant period, he has placed orders for takeout and dine-in directly from
`
`restaurants that sell their goods through Grubhub and Postmates, and indirectly from such
`
`restaurants through Caviar and Doordash.
`
`16.
`
`Plaintiff Nate Obey is a resident of Brooklyn, New York, and a citizen of New
`
`York. Over the relevant period, he has placed orders for takeout and dine-in directly from
`
`restaurants that sell their goods through Grubhub, and indirectly from such restaurants through
`
`Caviar.
`
`17.
`
`Plaintiff Malik Drewey is a resident of Queens, New York, and a citizen of New
`
`York. Over the relevant period, he has placed orders for takeout and dine-in directly from
`
`restaurants that sell their goods through each Defendant’s platform, but he has not used any of
`
`those platforms.
`
`b. Defendants
`
`18.
`
`Defendant Grubhub is a Delaware corporation with its principal place of business
`
`in Chicago, Illinois. Grubhub says it “connects more than 300,000 restaurants with hungry diners
`
`
`
`4
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 5 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 6 of 56
`
`
`
`
`
`
`
`in thousands of cities across the United States and is focused on transforming the takeout
`
`experience.” Grubhub’s 2019 revenues were $1.31 billion.
`
`19.
`
`Defendant Uber is a Delaware corporation with a principal place of business in San
`
`Francisco, California. Uber says its Uber Eats service “allows consumers to search for and
`
`discover local restaurants, order a meal, and either pick-up at the restaurant or have the meal
`
`delivered.” Uber’s 2019 revenues from this service were $2.5 billion.
`
`20.
`
`Defendant Postmates is a Delaware corporation with a principal place of business
`
`in San Francisco, California. Postmates says it is “transforming the way goods move around cities
`
`through [its] revolutionary Urban Logistics platform that connects customers with local couriers
`
`who can deliver anything from your favorite restaurant or retailer within minutes.” Postmates is
`
`not a public company; its reported valuation is approximately $2.4 billion.
`
`21.
`
`On July 6, 2020, Uber announced an agreement to acquire Postmates in a $2.65
`
`billion all-stock takeover.
`
`III.
`
`JURISDICTION AND VENUE
`
`22.
`
`This Court has subject matter jurisdiction under 28 U.S.C. § 1332(d)(2) because
`
`the matter in controversy exceeds the value of $5,000,000, exclusive of interests and costs, and is
`
`a class action in which any member of a class of plaintiffs is a citizen of a state different from any
`
`defendant. This Court also has subject matter jurisdiction under 28 U.S.C. §§ 1331 and 1337(a)
`
`and 15 U.S.C. § 15.
`
`23.
`
`Venue lies within this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391 because
`
`Defendants resided, transacted business, were found or had agents in this District, and a substantial
`
`portion of the alleged activity affected interstate trade and commerce in this District.
`
`
`
`5
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 6 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 7 of 56
`
`
`
`
`
`
`
`24.
`
`This Court has personal jurisdiction over Defendants because this action arises out
`
`of Defendants’ conduct in this District.
`
`IV.
`
`FACTUAL ALLEGATIONS
`
`a. The Relevant Product Markets
`
`25.
`
`Coupled with the already increasing frequency with which restaurants had come to
`
`offer takeout and delivery service, the advent of the internet even further changed the food
`
`industry. Instead of calling a restaurant to place an order for takeout or delivery, customers could
`
`order on a restaurant’s website menu.
`
`26.
`
`Defendant Grubhub was one of the first companies to build and operate an online
`
`platform through which restaurant menus in a particular region are aggregated to allow consumers
`
`to view available pickup or delivery options all at once.
`
`27.
`
`These “Restaurant Platforms” enable consumers to search for participating
`
`restaurants in a particular locality and order food for takeout or delivery from those restaurants.
`
`Restaurant Platforms also deliver food for participating restaurants that do not want to provide
`
`delivery themselves.
`
`28.
`
`In aggregating the offerings of multiple restaurants in a single place, Restaurant
`
`Platforms provide a service distinct from a restaurant’s website or app (e.g., a Domino’s pizza
`
`app), which simply allow a consumer to place an order from a single restaurant.
`
`29.
`
`Restaurant Platforms thus compete with each other in the product market for
`
`takeout and delivery orders from Restaurant Platforms (the “Restaurant Platform Market”).
`
`30.
`
`For purposes of this action, two additional product markets are also relevant. First,
`
`in addition to offering meals for takeout and delivery through Restaurant Platforms, restaurants
`
`also sell meals directly to consumers for takeout and delivery (the “Direct Takeout and Delivery
`
`
`
`6
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 7 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 8 of 56
`
`
`
`
`
`
`
`Market”). In the Direct Takeout and Delivery Market, a consumer may order directly from a
`
`restaurant for takeout or delivery by, for example, calling the restaurant’s phone number or by
`
`visiting the restaurant’s website. Second, consumers may also order meals to be eaten at a
`
`restaurant directly from that restaurant (the “Dine-In Market”). In the Dine-In Market, a consumer
`
`may order a meal from a restaurant and eat the meal at that restaurant, as opposed to taking that
`
`meal to eat elsewhere. These markets, in addition to the Restaurant Platform Market, are described
`
`in more detail below.
`
`b. The Restaurant Platform Market
`
`31.
`
`Although a number of firms participate in the Restaurant Platform Market, the
`
`market is dominated by just four firms: Doordash, Grubhub, Uber, and Postmates.
`
`32.
`
`According to data compiled by Vox, these firms control a remarkable 98% of the
`
`Restaurant Platform Market in the United States.
`
`33.
`
`Vox found that as of November 2019, Doordash’s national share of the market was
`
`37%, Grubhub’s share was 31%, Uber’s share was 20%, and Postmates’ share was 10%. This data
`
`underestimates Uber’s market share, because beginning in May 2019, some Uber Eats transactions
`
`became indistinguishable from Uber Rides transactions.
`
`34.
`
`These market shares vary across metropolitan areas. As The Atlantic has observed,
`
`Restaurant Platforms have “split their dominance regionally, like cable companies.” Grubhub, for
`
`example, controls 67% of the market in all of New York City, 4.5 times as much as its closest
`
`competitor in that market. Vox has summarized estimated shares in other markets:
`
`Local Market
`
`Grubhub Share
`
`Uber Share
`
`Postmates Share
`
`New York City
`
`SF Bay Area
`
`
`
`67%
`
`16%
`
`7
`
`14%
`
`13%
`
`4%
`
`8%
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 8 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 9 of 56
`
`
`
`
`
`Miami
`
`Houston
`
`Phoenix
`
`Dallas-Fort Worth
`
`Washington, D.C.
`
`Boston
`
`Los Angeles
`
`Chicago
`
`Philadelphia
`
`Atlanta
`
`
`
`11%
`
`9%
`
`15%
`
`12%
`
`22%
`
`41%
`
`19%
`
`37%
`
`42%
`
`12%
`
`55%
`
`29%
`
`23%
`
`32%
`
`28%
`
`26%
`
`15%
`
`24%
`
`16%
`
`40%
`
`
`
`19%
`
`4%
`
`23%
`
`4%
`
`7%
`
`4%
`
`37%
`
`6%
`
`3%
`
`10%
`
`35.
`
`This result is the natural consequence not only of so-called indirect network effects,
`
`as explained below, but also of Defendants’ anticompetitive conduct.
`
`c. The Business of Restaurant Platforms
`
`36.
`
`Restaurant Platforms are two-sided platforms, acting as an intermediary to connect
`
`restaurants and consumers to the benefit of both.
`
`37.
`
`In its most recent 10-K, Grubhub describes its business as follows: “The Company
`
`connects more than 300,000 restaurants with hungry diners in thousands of cities across the United
`
`States and is focused on transforming the takeout experience.”
`
`38.
`
`In its most recent 10-K, Uber similarly describes its business as follows: “Our Eats
`
`offering allows consumers to search for and discover local restaurants, order a meal, and either
`
`pick-up at the restaurant or have the meal delivered.”
`
`
`
`8
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 9 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 10 of 56
`
`
`
`
`
`
`
`39.
`
`Postmates, on its website, likewise describes itself as follows: “Postmates is
`
`transforming the way goods move around cities through [its] revolutionary Urban Logistics
`
`platform that connects customers with local couriers who can deliver nearly anything from your
`
`favorite restaurant or retailer in minutes.”
`
`40.
`
`Grubhub, Uber, and Postmates, like other Restaurant Platforms, not only connect
`
`restaurants and consumers, but also derive revenue from both restaurants and consumers.
`
`41.
`
`Restaurant Commission. When a consumer orders from a restaurant through a
`
`Restaurant Platform, the platform typically charges the restaurant a commission (the “Restaurant
`
`Commission”). The Restaurant Commission is typically equal to a rate (the “Restaurant
`
`Commission Rate”) multiplied by the total price of the order.
`
`42.
`
`If the restaurant does not provide its own delivery, the total price is the listed price
`
`of the goods ordered (e.g., the total price of two burgers, one order of fries, and a soda). Those
`
`prices, which are typically chosen by the restaurant, are referred to as the Restaurant List Prices.
`
`If the restaurant provides its own delivery, the total price is the sum of the Restaurant List Prices
`
`for the goods ordered, plus the delivery fees the restaurant charges. Defendants typically charge a
`
`30% Restaurant Commission Rate to restaurants that do not provide their own delivery, and a
`
`lower Restaurant Commission Rate for restaurants that do provide their own delivery.
`
`43.
`
`Consumer Commission. A Restaurant Platform also charges consumers a service
`
`fee (the “Consumer Commission”). The Consumer Commission is typically equal to a commission
`
`rate (the “Consumer Commission Rate”) multiplied by the total listed price of the order. The
`
`Consumer Commission Rate is typically between 5% and 10%. In some cases, Restaurant
`
`Platforms charge no Consumer Commission Rates for orders from restaurants that provide their
`
`own deliveries and for takeout orders.
`
`
`
`9
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 10 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 11 of 56
`
`
`
`
`
`
`
`44.
`
`Consumer Delivery Fee. Restaurant Platforms also typically charge the consumer
`
`a delivery fee for orders from restaurants that do not provide their own delivery (the “Consumer
`
`Delivery Fee”). The Consumer Delivery Fee is typically about 5%.
`
`45.
`
`The following is an example of the fees that Restaurant Platforms charge:
`
`
`
`Restaurant List Price
`
`Restaurant’s delivery price
`
`Restaurant Commission Rate
`
`Restaurant Commission
`
`Consumer Commission Rate
`
`Consumer Commission
`
`Consumer Delivery Fee
`
`Total Charged to Consumer
`
`Total Revenue for Restaurant
`Platform
`
`
`Scenario A:
`Restaurant
`Platform provides
`delivery
`
`
`Scenario B:
`Restaurant
`provides delivery
`
`Scenario C:
`Takeout
`orders
`
`$50.00
`
`n/a
`
`30%
`
`$15.00
`
`5%
`
`$2.50
`
`$2.50
`
`$55.00
`
`$20.00
`
`$50.00
`
`$2.00
`
`20%
`
`$10.40
`
`0%
`
`$0.00
`
`$0.00
`
`$52.00
`
`$10.40
`
`$50.00
`
`n/a
`
`15%
`
`$7.50
`
`0%
`
`$0.00
`
`$0.00
`
`$50.00
`
`$7.50
`
`
`The Restaurant Platform Market is a separate product market from both the Direct
`
`46.
`
`Takeout and Delivery Market and the Dine-In Market. This is because a hypothetical Restaurant
`
`Platform monopolist could profitably increase prices, as measured by the fees charged to both
`
`restaurants and consumers, above competitive levels.
`
`47.
`
`Although consumers may order meals for takeout or delivery in the Restaurant
`
`Platform Market or the Direct Takeout and Delivery Market, direct orders from restaurants (i.e.,
`
`
`
`10
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 11 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 12 of 56
`
`
`
`
`
`
`
`orders in the Direct Takeout and Delivery Market) are not reasonably interchangeable with orders
`
`from Restaurant Platforms. This is the case for several reasons.
`
`48.
`
`First, Restaurant Platforms offer services that restaurants do not offer. Restaurant
`
`Platforms list different restaurants that offer takeout and delivery in a particular area and thus allow
`
`the user to choose a restaurant based on her preferences, including based on reviews provided by
`
`other users of the Restaurant Platform. In allowing consumers to rate and review restaurants that
`
`they have ordered from, Restaurant Platforms allow consumers to share their experiences. In
`
`contrast, restaurants in the Direct Takeout and Delivery Market simply offer consumers the ability
`
`to place an order after the consumer has already decided to order from that restaurant.
`
`49.
`
`For example, Grubhub has a five-star rating system that allows its users to rate an
`
`individual restaurant, leave a review, and inform others what they ordered from the restaurant:
`
`50.
`
`Second, Restaurant Platforms allow consumers to place orders through mobile apps
`
`and websites, without speaking with a person. Once a consumer has provided a Restaurant
`
`
`
`
`
`11
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 12 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 13 of 56
`
`
`
`
`
`
`
`Platform with her payment information, then she can place future orders without providing that
`
`information again. Restaurants do not necessarily offer the same services; indeed, the vast
`
`majority of restaurants do not offer their own mobile apps and many do not offer online ordering.
`
`51.
`
`Third, as discussed in more detail below, Restaurant Platforms are “sticky,”
`
`meaning that consumers who become familiar with platforms are unlikely to switch to any other
`
`service, whether that other service is a competing Restaurant Platform or a restaurant website or
`
`mobile app. This means that a hypothetical Restaurant Platform monopolist could raise prices to
`
`a degree that it otherwise could not without seeing decreased profits.
`
`52.
`
`Fourth, although different consumers use Restaurant Platforms, they are especially
`
`popular among young professionals in major cities. This is a distinct group of consumers with
`
`distinct sensitivities to price changes and distinct preferences.
`
`53.
`
`These distinctions demonstrate that, if a hypothetical Restaurant Platform
`
`monopolist increased prices to 5% above competitive levels, not enough consumers would switch
`
`away from that platform to make that price increase unprofitable. As further support for this
`
`analysis, commentators and politicians have identified the Restaurant Platform Market as a distinct
`
`market, characterizing it as an oligopoly and calling for antitrust scrutiny of potential mergers in
`
`that market.
`
`54.
`
`Although (for purposes of antitrust law) the Restaurant Platform Market is distinct
`
`from the Direct Takeout and Delivery Market and the Dine-In Market, there is some cross-
`
`elasticity between the Restaurant Platform Market and those markets. If a hypothetical Restaurant
`
`Platform monopolist increased prices, some consumers would switch to ordering in the Direct
`
`Takeout and Delivery Market or the Dine-In Market. For example, it would not necessarily be
`
`profitable for a hypothetical Restaurant Platform monopolist to increase prices to more than 5%
`
`
`
`12
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 13 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 14 of 56
`
`
`
`
`
`
`
`above competitive levels. Put differently, a hypothetical Restaurant Platform monopolist that is
`
`already charging supracompetitive prices to restaurants and consumers may be unable, absent
`
`some other restrictive mechanism, to profitably increase those prices further.
`
`d. Defendants Contractually Restrict Restaurant Prices
`
`Defendants have leveraged their position in the relevant markets to force restaurants
`
`55.
`
`to enter into agreements that include clauses requiring uniform prices for restaurants’ menu items
`
`(the “No Price Competition Clause” or “NPCC”).
`
`56.
`
`In general, the NPCCs prohibit a supplier that sells through that platform from
`
`charging lower prices when that supplier sells through other channels. NPCCs may be broadly
`
`categorized as “narrow” or “wide.” In a “narrow NPCC,” the platform prohibits the supplier from
`
`selling its goods at a lower price when the supplier sells to consumers directly, as opposed to
`
`through the platform or some other non-direct channel. In a “wide NPCC,” the platform prohibits
`
`the supplier from selling its goods at a lower price when the supplier sells through any channel
`
`other than through the platform.
`
`57.
`
`Postmates imposes narrow NPCCs on restaurants that sell through Postmates.
`
`Postmates’s NPCC states: “Pricing shall be consistent with Merchant’s in-store pricing.” That is,
`
`“Postmates insists on price parity between in-store and online menus.”
`
`58.
`
`As a result, any restaurant that sells goods through Postmates is contractually
`
`prohibited from selling those goods at a lower price to consumers who purchase directly from that
`
`restaurant, regardless of whether the meal is for takeout, delivery, or dine-in, and regardless of
`
`whether that meal was ordered online, by phone, or in person. The restaurant may, however,
`
`charge a lower price when it sells its goods through a competing platform, such as Doordash.
`
`
`
`13
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 14 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 15 of 56
`
`
`
`
`
`
`
`59.
`
`Grubhub and Uber both impose wide NPCCs. Like Postmates’s NPCC, these
`
`provisions prohibit restaurants from selling at lower prices directly to consumers (regardless of
`
`whether the meal is for takeout, delivery, or dine-in, and regardless of whether that meal is ordered
`
`online, on the phone, or in person). But unlike Postmates’s NPCC, Grubhub’s and Uber’s wide
`
`NPCCs also prohibit restaurants from selling at lower prices to consumers through any competing
`
`Restaurant Platform. For a restaurant that sells through Grubhub or Uber, the restaurant’s
`
`Restaurant List Price on those platforms is the lowest price the restaurant is permitted to charge in
`
`selling its goods.
`
`60.
`
`Grubhub’s NPCC states: “The item pricing must be at least as favorable to the
`
`consumer as that which is available for Restaurant’s standard menu or offered to any 3rd party
`
`service.” Consistent with this provision, Grubhub boasts (in its 2019 10-K) that it offers “menu
`
`price parity with any other online ordering option.”
`
`61.
`
`Uber’s NPCC states: “Merchant may not make any Item available to Customers
`
`through the Eats App at a price that is higher than the price that Merchant charges in-store for
`
`similar Items. Merchant agrees that you will not make an Item available under this Agreement at
`
`a price higher than the amount Merchant is charging for similar Items through any comparable
`
`platform for food delivery services.”
`
`62.
`
`The Restaurant Platform industry as a whole demonstrates that Defendants’ NPCCs
`
`are not a necessary element of their business. Doordash, for example, does not impose these
`
`restrictions on restaurants that sell through its platform. Public reporting on Doordash highlights
`
`this distinction:
`
`For a very long time GrubHub forced stores to sell at the exact same
`menu price that they offered in store – exactly what you’re
`mentioning. But then DoorDash came out and said, “Hey
`restaurant, you do whatever you want for your pricing, if you want
`
`
`
`14
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 15 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 16 of 56
`
`
`
`
`
`
`
`to sell it on DoorDash at 10%, 15% higher, so forth.” So, lot[s] of
`restaurant clients really liked DoorDash as they could increase their
`prices to recover commission costs.
`
`Another publication characterized this fact as a key “differentiator” for Doordash, explaining that
`
`Doordash’s lack of NPCC was “a big win for restaurants” because it allows them to “increase
`
`prices on that platform to offset the delivery app’s commission fees, without increasing the in-
`
`house restaurant list price.”
`
`63.
`
`A 2016 Bloomberg article similarly reported: “An explanation for DoorDash’s
`
`price discrepancies can be found in a support document within the help section of the company’s
`
`website. It says partner restaurants may choose to charge customers more to make up for
`
`commissions paid to the delivery company.”
`
`64.
`
`Defendants’ NPCCs have forced consumers who purchase from restaurants directly
`
`or from other Restaurant Platforms to pay supracompetitive prices; have enabled Defendants to
`
`continue offering subpar technology and service; and have caused Restaurant Commission Rates
`
`to increase to such a degree that restaurants have been forced out of business. Defendants’ NPCCs
`
`are anticompetitive and do not have any procompetitive justification.
`
`e. Competition in the Restaurant Platform Market
`
`65.
`
`Restaurant Platforms compete with each other for both delivery and takeout orders.
`
`For an order to occur, a Restaurant Platform needs to match a consumer and a restaurant. As a
`
`result, in competing for orders, Restaurant Platforms compete with each other for both consumers
`
`and restaurants.
`
`66.
`
`Restaurant Platforms exhibit indirect network effects, in that the value that they
`
`offer to one side of the platform is a function of the extent of the use of the other side of the
`
`platform. A Restaurant Platform that more consumers use is more valuable to restaurants, because
`
`
`
`15
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 16 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 17 of 56
`
`
`
`
`
`
`
`the platform connects those restaurants with more consumers. Conversely, a Restaurant Platform
`
`that more restaurants use is more valuable to consumers, because that platform connects those
`
`consumers to more restaurants.
`
`67.
`
`These indirect network effects thus create a positive feedback loop for a market-
`
`leading Restaurant Platform. A Restaurant Platform that is popular with consumers is more
`
`attractive to restaurants and will therefore succeed in attracting more restaurants to the platform.
`
`Once more restaurants agree to use the platform, the platform becomes even more attractive to
`
`new consumers, who will also use that platform.
`
`68.
`
`In producing significant benefits to a market-leading Restaurant Platform, however,
`
`this positive feedback loop imposes significant barriers for smaller firms and new entrants. A
`
`small or new entrant cannot reasonably compete with larger Restaurant Platforms unless it can
`
`offer consumers a sufficient number of restaurants from which to choose. Conversely, the small
`
`or new entrant cannot realistically attract restaurants unless it can provide those restaurants with
`
`access to a sufficient number of consumers. Indirect network effects thus simultaneously make it
`
`easier for a market-leading firm to maintain its dominance and more difficult for a new entrant or
`
`smaller firm to establish a foothold.
`
`69.
`
`Even Amazon, for example, was unable successfully to break into the Restaurant
`
`Platform Market. As the New York Times explained: “Since it started in Seattle in 2015, Amazon
`
`Restaurants has struggled to gain a foothold in the restaurant delivery market,” where “nearly 80
`
`percent” of the market is controlled by “UberEats, Grubhub and DoorDash.” Accordingly, in June
`
`2019, Amazon Restaurants shut down.
`
`70.
`
`Indirect network effects alone, however, do not necessarily preclude new entrants
`
`or smaller firms from taking market share away from a market-leading firm. For example, one
`
`
`
`16
`
`

`

`
`
`Case 1:20-cv-03000-LAK Document 28 Filed 08/31/20 Page 17 of 55Case 1:20-cv-03000-LAK Document 39-1 Filed 10/19/20 Page 18 of 56
`
`
`
`
`
`
`
`journalist explained that Doordash was able to take market share away from Grubhub by
`
`expanding the services that it offered.
`
`Grubhub’s original model was a marketplace for consumers to order
`food from independent restaurants that already had their own
`delivery fleets. Though this was a game-changer for consumers, it
`constrained supply to only listing restaurants that could perform
`their own deliveries. This was a mistake.
`
`Postmates and DoorDash were the first to realize that if they could
`provide the broader group of restaurants that did not do delivery with
`the ability to do deliveries, they could dramatically increase the
`number of restaurants that could exist in the marketplace, thereby
`leapfrogging Grubhub’s selection (and liquidity).
`
`Once they realized this Achilles heel, Postmates and DoorDash
`raced to exploit the vulnerability with a growth-at-all costs
`mentality. Grubhub was caught backfooted. Grubhub thought that
`they had saturated the market, but they had only saturated a
`subsection of the market—independent restaurants that made their
`own deliveries. Meanwhile, DoorDash, Postmates, Uber Eats, and
`all other food delivery startups were racing to capitalize on the
`newer, bigger definition of the category.
`
`In addition to increasing the size of the market, Restaurant Platforms have also
`
`
`71.
`
`sought to gain and protect their market shares in a number of other ways.
`
`72.
`
`On the restaurant side, for example, Restaurant Platforms have sought to prevent
`
`competitors from signing up additional restaurants by entering into exclusive agreements with
`
`those restaurants. For example, Grubhub has an exclusive deal with Yum Brands (KFC and Taco
`
`Bell), Doordash has an exclusive deal with Chili’s and the Cheesecake Factory, and Uber used to
`
`have an exclusive deal with McDonald’s.
`
`73.
`
`On the consumer side, Restaurant Platforms