City prosecutor David Chiu faces immediate test in major concert economics lawsuit
Will the new city attorney, David Chiu, fight for progressive legislation that holds back big tech? We should find out soon.
Food delivery companies DoorDash and Grubhub are suing The City in a heated legal battle over the gig economy with surprising twists and turns.
First of all, companies have a star witness: the Mayor of London Breed. The companies based their lawsuit against The City largely on the statements and position of the mayor – who just appointed Chiu.
DoorDash and Grubhub are suing San Francisco over a city law capping the amount restaurants can be charged for delivery to 15% of the total bill. The race has backed a temporary order imposing the cap in 2020 in a bid to support struggling restaurants during COVID-19. But the mayor refused to sign subsequent legislation from the supervisory board that made the cap permanent.
The order became law without Breed’s signature, and the companies sued for damages and the revocation of the order. The business lawsuit directly cites the mayor’s objections to the permanent cap and cites his position more than a dozen times.
This week, the city asked for the case to be dismissed, and District Court Judge Edward Chen held a case management conference for February.
Chiu becomes the city’s lawyer on November 1. He was selected for the job by Breed, and he and Breed were heavily backed by one of DoorDash’s early investors, venture capitalist Ron Conway.
Chiu benefited from Conway’s political contributions in the race that sent him to the Assembly in 2014. And Conway donated and strongly supported Breed, pressuring supervisors to support her. Conway was an early investor in DoorDash and has been cited by its CEO, Tony Xu, as a key supporter throughout the company’s history.
Few of the people I have met are as genuine and sincere in their desire to support entrepreneurs as @RonConway. He not only supported DoorDash when we first started, but every year since. Give before you take like Ron does. A well-deserved recognition from @bchesky! https://t.co/oohDO7rkdq
– Tony Xu (@t_xu) December 18, 2020
In 2014, while chairman of the supervisory board, Chiu relaxed laws regulating Airbnb after Conway and another donor paid around $ 600,000 for letters attacking David Campos, Chiu’s opponent in a race to the assembly.
Chiu told The Examiner that he meddled with powerful business interests and held tech companies to account. “I have taken on some of the most ingrained corporate powers in America,” he said. “I will hold any business that doesn’t follow the law accountable.”
Chiu said his legislation regulating Airbnb was a big breakthrough. “No one was regulating short-term rentals until I did. And he said the money spent on attacking his opponent was an independent expense, not money given to his campaign. “I was not connected to this.”
Progressive politicians – including author of the contested food delivery law, Supervisor Aaron Peskin and Campos – who have been attacked in campaign ads, say they believe moderate Chiu will not pull the punches in the legal battles with the economy of odd jobs.
“I think he has integrity,” Peskin told The Examiner. “I hope his past political connections won’t impact the way he acts as a city attorney.”
“The town lawyer is my lawyer,” Peskin said, adding that he expects a strong defense of the law he helped draft.
The mayor declined to comment on the ongoing dispute. John Cote, spokesperson for the city attorney’s office, told The Examiner, “DoorDash and Grubhub have chosen to take this matter to court, so that’s where we’re going to tackle it. Conway and his company did not immediately respond to requests for comment.
The companies suing The City were happy to weigh in.
“The city of San Francisco has passed hasty, damaging and unconstitutional price controls that leave us with no choice but to resolve this matter in court,” a DoorDash spokesperson said in a statement to The Examiner.
Grubhub endorsed a statement, saying the city “has absolutely no legal basis for imposing permanent price controls on a private and highly competitive industry.”
A concert economics expert says Chiu may have his hands full defending San Francisco’s law.
“The natural inclination to want to help restaurants makes a lot of sense, but that’s not the way to do it,” said Paul Oyer, a Stanford professor of economics who studied industry at the National Bureau of Economic Research, and as the chief editor of the Journal of Labor Economics. “It is difficult to argue in favor of price controls here because there is healthy competition between the platforms. “
San Francisco restaurants are caught in the middle of the legal battle.
“I’m very unhappy that we’re here,” said Laurie Thomas, executive director of the Golden Gate Restaurant Association and owner of San Francisco restaurants Rose’s Cafe and Terzo. The legal battle is a setback, she said, and came as restaurants moved towards compromise with businesses. “I am very concerned that he is returning to zero regulation.”