Grubhub’s Antitrust Case to Proceed in Federal Court, Second Circuit Rules

In a ruling on Thursday, a Second Circuit panel determined that Grubhub must face an ongoing antitrust lawsuit in federal court, rejecting the company’s attempt to resolve the case through arbitration. The case, filed as a class action in 2020, accuses Grubhub, along with Postmates and Uber Eats, of engaging in anticompetitive behavior by requiring restaurants to refrain from offering lower prices to customers who order directly, outside of the platforms. According to Courthouse News, the plaintiffs allege this practice led to artificially inflated food prices.

Grubhub, along with its delivery app counterparts, contended that the diners’ claims were subject to arbitration, as users had agreed to such terms within the apps’ conditions. However, the panel’s decision, which affirmed a lower court ruling, found that Grubhub’s case should remain in federal court, distinguishing it from similar cases involving Postmates and Uber Eats.

According to Courthouse News, U.S. Circuit Judge José A. Cabranes explained that the claims at the heart of the lawsuit were not tied to the users’ interactions with Grubhub’s platform but rather related to their engagement with other restaurants and delivery services. “Rather, their claims concern their access and use of other platforms and restaurants,” Cabranes wrote. “They allege that they pay higher prices when ordering from these entities because of Grubhub’s anticompetitive practices.”

Related: EU Commission Raids Online Delivery Companies Amid Antitrust Probe

In contrast, the panel ruled in favor of Postmates and Uber Eats, reversing the lower court’s decision in their cases. The panel agreed that their arbitration agreements, which included clauses delegating the decision of arbitrability to the arbitrator, were enforceable. The plaintiffs had failed to challenge these provisions convincingly, according to the court’s opinion. “Plaintiffs fail to challenge the clause with sufficient specificity,” Cabranes stated in the decision.

In a separate concurring opinion, U.S. Circuit Judge Myrna Pérez underscored the significance of limiting the scope of merchants’ ability to compel arbitration in consumer disputes. “In my view, Grubhub barely threaded the needle through our precedents that have examined reasonable notice of arbitration agreements in the context of online interfaces,” Pérez noted.

Meanwhile, U.S. Circuit Judge Richard Sullivan, while agreeing with parts of the ruling, dissented regarding the majority’s view on the relevance of the diners’ use of Grubhub’s platform in relation to their antitrust claims.

Source: Courthouse News