Second Circuit Blocks NYC Food Delivery App Data-Sharing Law

• A Second Circuit panel has blocked New York City's Covid-era law requiring food delivery apps to share customer data with restaurants.
• The law was found to violate the First Amendment by failing to give consumers a suitable option to opt out of sharing their data.
• The ruling sets a precedent for the use of customer data by businesses and highlights the importance of giving consumers control over their data.
• Lawyers should take note of this decision, which may impact their clients' use of customer data and inform their advice on compliance with data-sharing regulations.

The law requires customers who want to opt out of data sharing to do so on an order-by-order basis, the result is a marketing list that no customer asked to join and that none can be confident they have permanently left.

A Second Circuit panel has blocked New York City's Covid-era law requiring third-party food delivery apps to share customer data with restaurants, ruling that the law violates the First Amendment. The decision is a significant blow to the city's efforts to help the restaurant industry recover from the pandemic by better connecting them with customers. The law was already enjoined in 2024 by U.S. District Judge Analisa Torres, who found it unconstitutional and potentially violating customers' privacy. However, the appeals court's ruling provides further clarity on the issue, as all three judges on the panel agreed that the law failed to give consumers a suitable option to opt out of sharing their data. The underlying lawsuit comes from DoorDash, GrubHub, and Uber Eats, who teamed up to sue the city in 2021, arguing that the required disclosure could help local restaurants poach away their delivery customers.

The appeals court's ruling is significant because it sets a precedent for the use of customer data by businesses. The judges scrutinized the scope of the data New York City sought to require the apps to share, finding that it was not information 'about' the marketplace itself but rather facts about third parties who use the marketplace. This distinction is crucial in determining whether the law violates the First Amendment. The court's decision also highlights the importance of giving consumers a suitable option to opt out of sharing their data. In this case, the law required customers to opt out on an order-by-order basis, which the judges found to be burdensome and unnecessary. The city has offered no evidence that this design serves its interests better than obvious alternatives would.

The ruling has significant implications for businesses that use customer data in their marketing efforts. Lawyers should take note of the precedent set by this decision, which may impact their clients' use of customer data and inform their advice on compliance with data-sharing regulations. The court's finding that the law compels speech for economic favoritism also raises questions about the legitimacy of such regulations. As the judges noted, a vague desire to support an industry does not justify abridging the freedom of speech of disfavored competitors. This ruling provides a valuable opportunity for businesses and policymakers to reassess their approach to data sharing and customer privacy.

Lawyers should watch for the precedent set by this ruling, which may impact their clients' use of customer data in marketing efforts and inform their advice on compliance with data-sharing regulations.

Source: Original reporting via Courthouse News Service