In a significant ruling affecting the food delivery industry, a federal judge has declared a New York City law unconstitutional. The law, which required food delivery companies to share customer data with restaurants, was struck down on September 24, 2024, by U.S. District Judge Analisa Torres in Manhattan.
The decision favors major food delivery platforms DoorDash, Grubhub, and Uber Eats, who challenged the law on constitutional grounds. Judge Torres ruled that the legislation violated the First Amendment by improperly regulating commercial speech, a principle that has been upheld by the U.S. Supreme Court, albeit with less protection than other forms of speech.
New York City, home to over 27,000 restaurants as of 2021, implemented the law in the summer of 2021 as part of a series of measures aimed at helping the restaurant industry recover from the COVID-19 pandemic. The pandemic, which began significantly impacting the city in March 2020, had devastating effects on the local food service sector.
The now-invalidated law required delivery companies to provide restaurants with customers' names, delivery addresses, email addresses, phone numbers, and order contents. This move was part of the city's efforts to protect restaurants from what it deemed "exploitive practices" by delivery platforms.
However, the food delivery companies argued that the law violated customer privacy rights and posed threats to data security. They also contended that it could harm their businesses by allowing restaurants to "poach customers away" through direct marketing efforts.
The food delivery market in the United States, valued at $26.5 billion in 2020, has seen significant growth, with companies like DoorDash holding the largest market share. Uber Eats, operating in over 6,000 cities across 45 countries, and Grubhub, acquired by Just Eat Takeaway.com in 2020 for $7.3 billion, are also major players in this competitive industry.
Judge Torres noted that the city had not demonstrated a substantial interest in helping restaurants collect customer data from delivery companies. She suggested less intrusive alternatives, such as allowing customers to decide whether to share their data, offering financial incentives for companies to share information, or subsidizing online ordering platforms for individual restaurants.
The ruling highlights the ongoing debate surrounding data privacy and regulation in the gig economy, which is estimated to include about 36% of U.S. workers. Unlike the European Union, which implemented the comprehensive General Data Protection Regulation (GDPR) in 2018, the United States lacks a federal data privacy law as of 2024.
"We are carefully reviewing the court's ruling."
The decision has been met with mixed reactions. DoorDash expressed satisfaction with the ruling, stating that it "rightly recognized how this law would have violated bedrock First Amendment rights of how we protect New Yorkers' data."
On the other hand, Andrew Rigie, executive director of the New York City Hospitality Alliance, a restaurant and nightlife industry trade group, expressed disappointment: "This decision hurts small businesses and consumers. We urge the city to appeal."
As the food delivery industry continues to evolve, with mobile ordering and delivery apps used by 38% of U.S. adults, this ruling sets a precedent for how customer data can be handled and shared. It also underscores the delicate balance between supporting local businesses, protecting consumer privacy, and maintaining fair competition in the rapidly growing digital marketplace.