Case 1:20-cv-05134 Document 1 Filed 07/06/20 Page 1 of 51
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`PHILIP ELIADES, JONATHAN SWABY,
`JOHN BOISI, and NATHAN OBEY,
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`Plaintiffs,
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`v.
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`GRUBHUB INC., UBER TECHNOLOGIES,
`INC., and POSTMATES INC.,
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`No. _______________
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`JURY TRIAL DEMANDED
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`Defendants.
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`CLASS ACTION COMPLAINT
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`Plaintiffs, Philip Eliades, Jonathan Swaby, John Boisi, and Nathan Obey, individually and
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`on behalf of all others similarly situated, bring this action against Grubhub Inc. (“Grubhub”), Uber
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`Technologies, Inc. (“Uber”), and Postmates Inc. (“Postmates”) and allege as follows:
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`I.
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`INTRODUCTION
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`1.
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`Defendants have violated sections 1 and 2 of the Sherman Act and their state
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`analogues by exploiting, without procompetitive justification, their dominant position in the fast-
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`growing market for delivery and takeout through internet-based platforms that aggregate the
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`offerings of multiple restaurants.
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`2.
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`Given the convenience these platforms offer, and because most restaurants face low
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`profit margins and the subsequent need for volume to cover their costs, the increasing popularity
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`of these platforms has in effect required vast numbers of restaurants to use them.
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`3.
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`Under those conditions, Defendants require any restaurant that sells its goods on
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`Defendants’ platforms to pay unreasonable commissions each time a consumer orders from that
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`restaurant through Defendants’ platforms. These commissions force restaurants to charge higher
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`prices when they sell through Defendants’ platforms to avoid losing money on each sale.
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`4.
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`In a freely competitive market, the restaurants would effectively offset these
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`increased costs by having them paid by those consumers who choose the convenience of
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`Defendants’ platforms. That is, absent restrictions, these restaurants would offer their customers
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`different prices depending on whether they used Defendants’ platforms or placed orders directly
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`through the restaurant.
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`5.
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`Insulating their platforms, however, each Defendant contractually prevents the
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`restaurants from offering lower prices for sales outside its platform. For each Defendant, these
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`restrictions apply to direct orders from the restaurants for takeout, delivery, or sit-down. GrubHub
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`and Uber apply these restrictions most broadly by preventing restaurants from charging lower
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`prices for orders through similar platforms, such as DoorDash. Defendants do this because if the
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`restaurants were to offer lower prices for sales outside each Defendant’s platform, then such
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`pricing would reduce the restaurants’ sales on the platform and reduce the Defendant’s profits.
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`6.
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`These anticompetitive agreements prevent both restaurants and other platforms
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`from competing with Defendants and thus force all consumers to pay supracompetitive prices. The
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`result of Defendants’ conduct, in short, is that any restaurant using any Defendant’s platform
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`charges all of its customers supracompetitive prices.
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`7.
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`On behalf of a nationwide class of the customers of restaurants using these
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`platforms, Plaintiffs bring this action to enjoin and to seek redress for this unlawful conduct.
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`II.
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`PARTIES
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`a. Plaintiffs
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`8.
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`Plaintiff Phil Eliades is a resident of New York, New York, and a citizen of New
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`York. Over the relevant period, he has ordered meals for takeout, delivery, and sit-down directly
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`from restaurants that sell their goods through each Defendant’s platform. He has also placed orders
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`through Restaurant Platforms from restaurants that sell through Defendants’ platforms.
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`9.
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`Plaintiff Jonathan Swaby is a resident of New York, New York, and a citizen of
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`New York. Over the relevant period, he has ordered meals for takeout, delivery, and sit-down
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`directly from restaurants that sell their goods through each Defendant’s platform. He has also
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`placed orders through Restaurant Platforms from restaurants that sell through Defendants’
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`platforms.
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`10.
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`Plaintiff John Boisi is a resident of Brooklyn, New York, and a citizen of New
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`York. Over the relevant period, he has ordered meals for takeout and sit-down directly from
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`restaurants that sell their goods through Grubhub and Postmates. He has also placed orders through
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`Restaurant Platforms from restaurants that sell through Defendants’ platforms.
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`11.
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`Plaintiff Nate Obey is a resident of Brooklyn, New York, and a citizen of New
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`York. Over the relevant period, he has ordered meals for takeout and sit-down directly from
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`restaurants that sell their goods through Grubhub. He has also placed orders through Restaurant
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`Platforms from restaurants that sell through Defendants’ platforms.
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`b. Defendants
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`12.
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`Defendant Grubhub is a Delaware corporation with its principal place of business
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`in Chicago, Illinois. Grubhub says it “connects more than 300,000 restaurants with hungry diners
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`in thousands of cities across the United States and is focused on transforming the takeout
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`experience.” Grubhub’s 2019 revenues were $1.31 billion.
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`13.
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`Defendant Uber is a Delaware corporation with a principal place of business in San
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`Francisco, California. Uber says its Uber Eats service “allows consumers to search for and
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`discover local restaurants, order a meal, and either pick-up at the restaurant or have the meal
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`delivered.” Uber’s 2019 revenues from this service were $2.5 billion.
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`14.
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`Defendant Postmates is a Delaware corporation with a principal place of business
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`in San Francisco, California. Postmates says it is “transforming the way goods move around cities
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`through [its] revolutionary Urban Logistics platform that connects customers with local couriers
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`who can deliver anything from your favorite restaurant or retailer within minutes.” Postmates is
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`not a public company; its reported valuation is approximately $2.4 billion.
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`15.
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`On July 6, 2020, Uber announced an agreement to acquire Postmates in a $2.65
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`billion all-stock takeover.
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`III.
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`JURISDICTION AND VENUE
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`16.
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`This Court has subject matter jurisdiction under 28 U.S.C. § 1332(d)(2) because
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`the matter in controversy exceeds the value of $5,000,000, exclusive of interests and costs, and is
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`a class action in which any member of a class of plaintiffs is a citizen of a State different from any
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`defendant. This Court also has subject matter jurisdiction under 28 U.S.C. §§ 1331 and 1337(a)
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`and 15 U.S.C. § 15.
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`17.
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`Venue lies within this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391 because
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`Defendants resided, transacted business, were found or had agents in this District, and a substantial
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`portion of the alleged activity affected interstate trade and commerce in this District.
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`18.
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`This Court has personal jurisdiction over Defendants because this action arises out
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`of Defendants’ conduct in this District.
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`IV.
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`FACTUAL ALLEGATIONS
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`a. The Relevant Markets
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`19.
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`Coupled with the already increasing frequency with which restaurants had come to
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`offer takeout and delivery service, the advent of the internet even further changed the food
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`industry. Instead of calling a restaurant to place an order for takeout or delivery, customers could
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`order on the restaurant’s website menu.
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`20.
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`Defendant Grubhub was one of the first companies to build and operate an online
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`platform through which restaurant menus in a particular region are aggregated to allow consumers
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`to view available pickup or delivery options all at once.
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`21.
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`These “Restaurant Platforms” enable consumers to search for participating
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`restaurants in a particular locality and order food for takeout or delivery from those restaurants.
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`Restaurant Platforms also deliver food for participating restaurants that do not want to provide
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`delivery themselves.
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`22.
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`In aggregating the offerings of multiple restaurants in a single place, Restaurant
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`Platforms provide a service distinct from a restaurant’s website or app (e.g., a Domino’s pizza
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`app), which simply allow a consumer to place an order from a single restaurant.
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`23.
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`Restaurant Platforms thus compete with each other in the product market for
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`takeout and delivery orders from Restaurant Platforms (the “Restaurant Platform Market”).
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`24.
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`Restaurant Platforms also compete in the product market for takeout and delivery
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`orders from restaurants (the “Takeout and Delivery Market”). That is, by providing a channel
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`through which consumers may order takeout and delivery from restaurants, Restaurant Platforms
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`compete directly with the restaurants themselves for such orders.
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`25.
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`A recent survey from Restaurant Owners indicates that more than 25% of
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`independent restaurants have their own delivery fleets. These restaurants could accept orders from,
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`and provide delivery to, consumers without any assistance from Restaurant Platforms.
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`26.
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`In addition, as explained further below, although Restaurant Platforms do not
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`directly participate in the product market for sit-down meals at restaurants (the “Sit-Down
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`Market”), Restaurant Platforms substantially affect that market through their dealings with
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`restaurants. The Sit-Down Market is distinct from the Takeout and Delivery Market because, for
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`a consumer who wants to eat at home, a meal at a restaurant is not a reasonable substitute.
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`b. The Restaurant Platform Market
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`27.
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`Although a number of firms participate in the Restaurant Platform Market, the
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`market is dominated by just four firms: DoorDash, Grubhub, Uber, and Postmates.
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`28.
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`According to data compiled by Vox, these firms control 98% of the Restaurant
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`Platform Market in the United States.
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`29.
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`Vox found that, as of November 2019, DoorDash’s national share of the market
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`was 37%, Grubhub’s share was 31%, Uber’s share was 20%, and Postmates’ share was 10%. This
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`data underestimates Uber’s market share, because beginning in May 2019, some Uber Eats
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`transactions became indistinguishable from Uber Rides transactions.
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`30.
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`These market shares vary significantly across metropolitan areas. As The Atlantic
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`has observed, Restaurant Platforms have “split their dominance regionally, like cable companies.”
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`Grubhub, for example, controls 67% of the market in New York City, 4.5 times as much as its
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`closer competitor in that market. Vox has summarized estimated shares in other markets:
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`31.
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`This result is the natural consequence not only of so-called indirect network effects,
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`as explained below, but also of Defendants’ anticompetitive conduct.
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`c. The Business of Restaurant Platforms
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`32.
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`Restaurant Platforms are two-sided platforms, acting as an intermediary to connect
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`restaurants and consumers to the benefit of both.
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`33.
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`In its most recent 10-K, Grubhub describes its business as follows: “The Company
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`connects more than 300,000 restaurants with hungry diners in thousands of cities across the United
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`States and is focused on transforming the takeout experience.”
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`34.
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`In its most recent 10-K, Uber similarly describes its business as follows: “Our Eats
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`offering allows consumers to search for and discover local restaurants, order a meal, and either
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`pick-up at the restaurant or have the meal delivered.”
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`35.
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`Postmates, on its website, likewise describes itself as follows: “Postmates is
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`transforming the way goods move around cities through [its] revolutionary Urban Logistics
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`platform that connects customers with local couriers who can deliver nearly anything from your
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`favorite restaurant or retailer in minutes.”
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`36.
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`Grubhub, Uber, and Postmates, like other Restaurant Platforms, not only connect
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`restaurants and consumers, but also derive revenue from both restaurants and consumers.
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`37.
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`Restaurant Commission. When a customer orders from a restaurant through a
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`Restaurant Platform, the platform typically charges the restaurant a commission (the “Restaurant
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`Commission”). The Restaurant Commission is typically equal to a rate (the “Restaurant
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`Commission Rate”) multiplied by the total price of the order, based on the prices—which the
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`restaurant typically chooses—listed on the Restaurant Platform (the “Restaurant List Price”).
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`38.
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`If the restaurant does not provide its own delivery, the total price is the listed price
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`of the goods ordered (e.g., the total price of two burgers, one order of fries, and a soda). If the
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`restaurant does provide its own delivery, the total price is the listed price of the goods ordered plus
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`the delivery fees the restaurant charges. Defendants typically charge a 30% Restaurant
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`Commission Rate to restaurants that do not provide their own delivery, and a lower Restaurant
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`Commission Rate for restaurants that do provide their own delivery and for takeout orders.
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`39.
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`Consumer Commission. A Restaurant Platform also charges consumers a service
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`fee (the “Consumer Commission”). The Consumer Commission is also typically equal to a
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`commission rate (the “Consumer Commission Rate”) multiplied by the total listed price of the
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`order. The Consumer Commission Rate is typically between 5% and 10%. In some cases,
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`Restaurant Platforms charge no Consumer Commission Rates for orders from restaurants that
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`provide their own deliveries and for takeout orders.
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`40.
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`Consumer Delivery Fee. Restaurant Platforms also typically charge the consumer
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`a delivery fee for orders from restaurants that do not provide their own delivery (the “Consumer
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`Delivery Fee”). The Consumer Delivery Fee is typically about 5%.
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`41.
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`The following is an example of the fees the Restaurant Platforms charge:
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`Scenario A:
`Restaurant
`Platform provides
`delivery
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`$50.00
`n/a
`30%
`$15.00
`5%
`$2.50
`$2.50
`$55.00
`$20.00
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`Scenario B:
`Restaurant
`provides delivery
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`Scenario C:
`Takeout
`orders
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`$50.00
`$2.00
`20%
`$10.40
`0%
`$0.00
`$0.00
`$52.00
`$10.40
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`$50.00
`n/a
`15%
`$7.50
`0%
`$0.00
`$0.00
`$50.00
`$7.50
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`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
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`d. Defendants Use MFNs to Control Restaurant Prices
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`Defendants have leveraged their position in the relevant markets to force restaurants
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`42.
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`to enter into agreements that contain most-favored nation provisions (“MFNs”).
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`43.
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`In general, MFNs imposed by a platform prohibit a supplier that sells through that
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`platform from charging lower prices when that supplier sells through other channels. MFNs may
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`be broadly categorized as “narrow” or “wide.” In a “narrow MFN,” the platform prohibits the
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`supplier from selling its goods at a lower price when the supplier sells to consumers directly, as
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`opposed to through the platform or some other non-direct channel. In a “wide MFN,” the platform
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`prohibits the supplier from selling its goods at a lower price when the supplier sells through any
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`channel other than through the platform.
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`44.
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`Postmates imposes narrow MFNs on restaurants that sell through Postmates.
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`Postmates’s MFN states: “Pricing shall be consistent with Merchant’s in-store pricing.” That is,
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`“Postmates insists on price parity between in-store and online menus.”
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`45.
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`As a result, any restaurant that sells goods through Postmates is contractually
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`prohibited from selling those goods at a lower price to consumers who purchase directly from that
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`restaurant, regardless of whether the meal is for takeout, delivery, or sit-down, and regardless of
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`whether that meal was ordered online, by phone, or in person. The restaurant may, however,
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`charge a lower price when it sells its goods through a competing platform, such as Doordash.
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`46.
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`Grubhub and Uber both impose wide MFNs. These provisions prohibit restaurants
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`from selling at lower prices directly to consumers (regardless of whether the meal is for takeout,
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`delivery, or sit-down, and regardless of whether that meal is ordered online, on the phone, or in
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`person); or to consumers through any competing Restaurant Platform. In short, for a restaurant
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`that sells through Grubhub or Uber, the restaurant’s Restaurant List Price is the lowest price the
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`restaurant is permitted to charge.
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`47.
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`Grubhub’s MFN states: “The item pricing must be at least as favorable to the
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`consumer as that which is available for Restaurant’s standard menu or offered to any 3rd party
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`service.” Consistent with this provision, Grubhub boasts (in its 2019 10-K) that it offers “menu
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`price parity with any other online ordering option.”
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`48.
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`Uber’s MFN states: “Merchant may not make any Item available to Customers
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`through the Eats App at a price that is higher than the price that Merchant charges in-store for
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`similar Items. Merchant agrees that you will not make an Item available under this Agreement at
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`a price higher than the amount Merchant is charging for similar Items through any comparable
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`platform for food delivery services.”
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`49.
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`The Restaurant Platform industry as a whole demonstrates that Defendants’ MFNs
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`are not necessary. Doordash, for example, does not impose these restrictions on restaurants that
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`sell through its platform. Public reporting on Doordash highlights this distinction:
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`“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 to sell it on
`DoorDash at 10%, 15% higher, so forth.’ So, lot[s] of restaurant
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`clients really liked DoorDash as they could increase their prices to
`recover commission costs.”
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`A 2016 Bloomberg article similarly reported: “An explanation for DoorDash’s
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`50.
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`price discrepancies can be found in a support document within the help section of the company’s
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`website. It says partner restaurants may choose to charge customers more to make up for
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`commissions paid to the delivery company.”
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`51.
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`Defendants’ MFNs have forced consumers who purchase from restaurants directly
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`or from other Restaurant Platforms to pay supracompetitive prices; have enabled Defendants to
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`continue offering subpar technology and service; and have caused Restaurant Commission Rates
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`to increase to such a degree that restaurants have been forced out of business. Defendants’ MFNs
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`are anticompetitive and do not have any procompetitive justification.
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`e. Competition in the Restaurant Platform Market
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`52.
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`Restaurant Platforms compete with each other for both delivery and takeout orders.
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`For an order to occur, a Restaurant Platform needs to match a consumer and a restaurant. As a
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`result, in competing for orders, Restaurant Platforms compete with each other for both consumers
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`and restaurants.
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`53.
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`Restaurant Platforms exhibit indirect network effects, in that the value that they
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`offer to one side of the platform is a function of the extent of the use of the other side of the
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`platform. A Restaurant Platform that more consumers use is more valuable to restaurants, because
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`the platform connects those restaurants with more consumers. Conversely, a Restaurant Platform
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`that more restaurants use is more valuable to consumers, because that platform connects those
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`consumers to more restaurants.
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`54.
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`These indirect network effects thus create a positive feedback loop for a market-
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`leading Restaurant Platform. A Restaurant Platform that is popular with consumers is more
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`attractive to restaurants and will therefore succeed in attracting more restaurants to the platform.
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`Once more restaurants agree to use the platform, the platform becomes even more attractive to
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`new consumers, who will also use that platform.
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`55.
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`In producing significant benefits to a market-leading Restaurant Platform, however,
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`this positive feedback loop imposes significant barriers for smaller firms and new entrants. A
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`small or new entrant cannot reasonably compete with larger Restaurant Platforms unless it can
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`offer consumers a sufficient number of restaurants from which to choose. Conversely, the small
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`or new entrant cannot realistically attract restaurants unless it can provide those restaurants with
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`access to a sufficient number of consumers. Indirect network effects thus simultaneously make it
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`easier for a market-leading firm to maintain its dominance and more difficult for a new entrant or
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`smaller firm to establish a foothold.
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`56.
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`Even Amazon, for example, was unable successfully to break into the Restaurant
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`Platform Market. As the New York Times explained: “Since it started in Seattle in 2015, Amazon
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`Restaurants has struggled to gain a foothold in the restaurant delivery market,” where “nearly 80
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`percent” of the market is controlled by “UberEats, Grubhub and DoorDash.” Accordingly, in June
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`2019, Amazon Restaurants shut down.
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`57.
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`Indirect network effects alone, however, do not necessarily preclude new entrants
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`or smaller firms from taking market share away from a market-leading firm. For example, one
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`journalist explained that DoorDash was able to take market share away from Grubhub by
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`expanding the services that it offered.
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`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.
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`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).
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`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.
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`In addition to increasing the size of the market, Restaurant Platforms have also
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`58.
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`sought to gain and protect their market shares in a number of other ways.
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`59.
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`On the restaurant side, Restaurant Platforms have sought to prevent competitors
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`from signing up additional restaurants by entering into exclusive agreements with those
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`restaurants. For example, Grubhub has an exclusive deal with Yum Brands, DoorDash has an
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`exclusive deal with Chili’s and the Cheesecake Factory, and Uber used to have an exclusive deal
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`with McDonald’s.
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`60.
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`On the consumer side, Restaurant Platforms have sought to discourage consumers
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`from using more than one Restaurant Platform, or “multihoming,” by offering what are essentially
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`volume discounts.
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`61.
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`Restaurant Platforms could also compete by offering consumers and restaurants
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`better technology or better service, by offering restaurants lower Restaurant Commission Rates,
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`and by offering consumers lower Consumer Commission Rates. Defendants’ conduct, however,
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`including their MFNs, has limited such forms of competition.
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`f. Competition in the Takeout and Delivery Market
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`62.
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`The restaurant industry is notoriously competitive and dynamic. In 2018, there
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`were approximately 650,000 restaurants in the United States, with about 60,000 opening and
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`50,000 closing every year. As this turnover indicates, the profit margins of restaurants are typically
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`thin. According to Upserve, a company that provides restaurant-management software, restaurant
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`profit margins generally range from 0% to 15%. Because of these thin profit margins, restaurants
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`generally need a significant number of sales to cover their fixed costs.
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`63.
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`Restaurants generate revenue by selling through both the Takeout and Delivery
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`Market and the Sit-Down Market. Over the past several years, an increasing number of
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`restaurants’ takeout and delivery sales have been placed through Restaurant Platforms. Analysis
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`from Cowen indicates that the share of delivery orders placed online increased from approximately
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`26% in 2012 to 46% in 2017, with the prediction that they would rise to 73% by 2022. Morgan
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`Stanley’s research indicates that much of this growth occurred, and will continue to occur, on
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`Restaurant Platforms: the proportion of online delivery orders through Restaurant Platforms
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`increased from 41% in 2015 to 68% in 2018. Morgan Stanley projects that this number will
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`increase to 87% by 2025.
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`64.
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`These market conditions mean that restaurants must work with Defendants, which
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`each have a significant share of the fast-growing Restaurant Platform Market, to generate sufficient
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`sales to turn a profit. As one restaurant owner has explained: “These delivery companies were
`
`never something I wanted to work with, but we have to. . . . We are a fast-casual restaurant. We
`
`are dependent upon volume to make any money.” Another restaurant owner explained to Forbes:
`
`“These platforms are growing exponentially and have developed a primary relationship with
`
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`14
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`Case 1:20-cv-05134 Document 1 Filed 07/06/20 Page 15 of 51
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`
`
`
`
`
`customers. They are not providing a service; they are growing a network. If you ‘own’ the
`
`customer, you can charge whatever you want, which is what they are doing.”
`
`65.
`
`These are not mere anecdotes. The New York Times has explained that Restaurant
`
`Platforms are so popular with consumers that “few restaurants can afford to opt out.” Buzzfeed
`
`News has explained that restaurants “have no choice to use them if they want to retain customers.”
`
`Food & Wine has concluded: “Most restaurant owners don’t feel like they have a choice but to
`
`work with these platforms to survive.”
`
`66.
`
`Accordingly, the best estimate is that the vast majority of the 650,000 restaurants
`
`in the United States sell through Restaurant Platforms. Analysis from Money Under 30 indicates
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`that 300,000 of these restaurants sell through Grubhub and 600,000 sell through Postmates, and
`
`that over 300,000 restaurants worldwide sell through Uber. Data from Reuters indicates that over
`
`100,000 restaurants sell through Uber in the United States and Canada, and confirms that 300,000
`
`restaurants in the United States sell through Grubhub.
`
`67.
`
`Analysis from Thinknum shows that, in some markets, Restaurant Platforms have a
`
`stranglehold on restaurants. In New York City, nearly 60% of restaurants sell through Grubhub;
`
`in Chicago, approximately 85% of all restaurants sell through Grubhub; and in Las Vegas and San
`
`Francisco, nearly all restaurants do so:
`
`City
`
`New York
`
`Los Angeles
`
`Chicago
`
`Houston
`
`Las Vegas
`
`Total Restaurants Restaurants on
`Grubhub
`
`26,697
`
`Restaurants on
`Uber
`
`3,056
`
`15,074
`
`29,560
`
`8,675
`
`10,000
`
`4,364
`
`7,531
`
`7,319
`
`4,803
`
`4,246
`
`2,216
`
`2,323
`
`n/a
`
`n/a
`
`
`
`15
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`Case 1:20-cv-05134 Document 1 Filed 07/06/20 Page 16 of 51
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`
`San Diego
`
`San Francisco
`
`Philadelphia
`
`Miami
`
`7,000
`
`4,015
`
`6,000
`
`4,995
`
`4,161
`
`3,935
`
`3,913
`
`3,726
`
`
`
`n/a
`
`n/a
`
`n/a
`
`n/a
`
`
`
`
`
`Although data for Uber is more limited than data for Grubhub, it is reasonable to infer that more
`
`restaurants use Uber in markets where Uber’s sales exceed Grubhub’s, such as Miami and
`
`Houston. As a result, it is likely that more than 75% of restaurants in Miami and more than 48%
`
`of restaurants in Houston use Uber. These estimates for Uber use in New York, moreover, do not
`
`appear to include restaurants outside Manhattan.
`
`68.
`
`Data for Postmates is not publicly available, but the analysis from Money Under 30
`
`indicates that even more restaurants use Postmates than Grubhub or Uber. This conclusion is even
`
`stronger in markets where more restaurants use Postmates than Grubhub.
`
`69.
`
`In any event, it is reasonable to infer that in Los Angeles, a market where Postmates
`
`outsells Grubhub two-to-one, more restaurants use Postmates than Grubhub. The same is true with
`
`respect to Miami, where Postmates’ sales also exceed Grubhub’s. As a result, it is likely that
`
`substantially more than 25% of restaurants in Los Angeles and more than 75% of restaurants in
`
`Miami use Postmates.
`
`70. With respect to restaurants that offer delivery (a subset of all restaurants), the
`
`percentage that sell through Restaurant Platforms is even higher. According to a survey from
`
`Restaurant Owner, for example, in 2019 almost 80% of independent restaurants that offered
`
`delivery did so through a Restaurant Platform.
`
`
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`Case 1:20-cv-05134 Document 1 Filed 07/06/20 Page 17 of 51
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`
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`71.
`
`The market conditions are such that even restaurants that do not agree to work with
`
`Restaurant Platforms are forced to deal with them, in that Restaurant Platforms have added some
`
`restaurants to their platforms without their consent. One restaurant owner described her experience
`
`with Grubhub as follows:
`
`“If we don’t sign up for this ‘partnership’ you pirate our menus off
`our website and take orders from customers anyway,” continues
`Wade in the letter. “The pre-charged payment cards sometimes
`don’t work and everything we made languishes, unpaid for. We
`field angry calls from customers who think it’s our fault they didn’t
`get the food they ordered. When my manager called customer
`service to tell you how unfair it is that we are paying for your
`mistakes, he was told ‘Well, none of this would happen if you would
`just sign up with us.’ Which sounds a lot like what the mob boss
`says after they burn down your house.”
`
`In addition to having to work with them, restaurants are also forced to compete with
`
`
`72.
`
`these Restaurant Platforms in the Takeout and Delivery Market. As Grubhub observes, its
`
`competitors include “the traditional offline ordering process used by the vast majority of
`
`restaurants” and “online competition” from “national and local service providers, point-of-sale
`
`module vendors that serve some independent restaurants who have their own standalone websites
`
`and the online interfaces of Enterprise restaurants that also offer takeout.”
`
`73.
`
`Grubhub’s conduct further confirms that it competes with restaurants for orders.
`
`Grubhub has created “shadow” websites for restaurants that consumers can use to place orders.
`
`These shadow websites, which may appear to be restaurants’ actual websites, are designed to divert
`
`what would otherwise be direct orders from restaurants to Grubhub. Uber likewise has stated (in
`
`its 2019 10-K) that its competitors include both other Restaurant Platforms and restaurants.
`
`74.
`
`Unsurprisingly, sales through Restaurant Platforms have cannibalized restaurants’
`
`direct sales. For example, a New York City Hospitality Alliance survey indicates that, for 2 out
`
`
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`17
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`Case 1:20-cv-05134 Document 1 Filed 07/06/20 Page 18 of 51
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`
`
`
`
`
`of 3 restaurants, customers who previously ordered directly now order through Grubhub. As The
`
`New Yorker has explained:
`
`Companies like GrubHub maintain that the revenue they bring
`restaurants is “incremental”—the cherry on top, so to speak, of
`whatever sales the place