Why the Price Fixing Lawsuit Against Danny Meyer Is So Ridiculous

A new lawsuit is painting Danny Meyer as the ringleader of a price fixing scheme and “conspiracy [that] unlawfully transfers millions of dollars from customers and servers to restaurant owners in violation of federal and state antitrust laws.”

That so-called “conspiracy” is supposedly the way Meyer — the avuncular hospitality guru and founder of the billion dollar Shake Shack chain — is implementing his plan to end tipping. The suit, filed in California, also names other top NYC restaurateurs like David Chang, Tom Colicchio, and Will Guidara as members of Meyer’s alleged scheme.

I’ll let the lawyers and judges determine these matters on the legal merits, but as someone who’s been reporting on wage and labor issues in the hospitality industry, and as the person who first broke Meyer’s no tipping plan, I can say without equivocation that this is the most bananas lawsuit I’ve ever encountered. So here are a few things worth keeping in mind while contemplating this suit.

1. The plaintiff seems to be a man who thought he was ripped off

Hospitality suits can be tough to read, with pages upon pages detailing painful allegations of tip-skimming, wage theft, and sometimes even abuse. In this particular case, however, the plaintiff’s claims are boiled down to a single sentence: Timothy Brown “purchased food from certain defendant restaurants during the course of the conspiracy, and was overcharged as a direct result of the conspiracy.” That’s it.

When normal diners become disgruntled with this sort of thing, they ask to speak with a manager to arrange for a partial refund or a free round of espresso martinis. Brown, by contrast, apparently found a bunch of local anti-trust lawyers to pen a brief asking for threefold recovery of “actual damages” for himself or anyone else who felt overcharged, plus attorneys’ fees and interest, while noting that such actions are a felony punishable by up to 10 years in jail.

It’s the type of reaction that raises questions about the motive behind the suit — and about whether it’s driven by the diner or by the lawyers themselves.

2. The lawsuit has a bizarre revolutionary tint

The complaint’s 47 pages read like a Marxist damnation of the hospitality industry, depicting Meyer and other restaurateurs as members of a racketeering ring dedicated to extracting wealth from the underpaid masses. “The conspiracy is in its early experimental stage,” the authors warn, adding that restaurants, in cahoots with a “compliant media,” have depicted the no-tipping movement “as intended to promote social justice and equality, while the real aim and effect is greater profit at the expense of workers and consumers.”

The more frequently parroted — and more generally accepted — criticism of no-tipping policies is that even though cook pay rises and servers gain predictability in pay and scheduling, the latter sometimes earn a touch less and end up having to pick up an extra half shift or so to stay even.

3. The lawsuit heavily cites internet commenters

“Unlike the mainstream media, many commentators have viewed with skepticism the restaurateurs’ claim they are motivated by social justice concerns,” the lawsuit states. The lawyers present literal pages of statements from those so-called commentators, which appear to be cut and pasted from Eater, YouTube, and other various Internet sites. Among the discourse cited are grammatically-rich statements like: “owners are jacking employee tip jars across the country. DUHHHHH,” as well as, “wow!!! they make more money?? wow?? how? Ah ... yes ... they taking the tips from the waiters and putting in their pocket...great management!!”

Or my favorite: “If you want to pay your kitchen staff more, just F***ING do it.”

4. The lawsuit pins its arguments on tenuous price fixing allegations

The complaint argues that a handful of California restaurateurs who agreed to eliminate tipping and raise prices in 2014 are part of a “larger conspiracy” that was “spearheaded” by Meyer. Thing is, Meyer did not announce his plan to end tipping until October 2015, and the authors don’t appear to link the San Francisco efforts to those of Meyer, except for mentioning that, well, one happened after the other!

The plaintiffs also state that in the summer of 2015, Meyer gathered together fifteen restaurateurs to inform them of his plans, citing the Wall Street Journal. “The apparent purpose of the meeting was to solicit participation by the attendees,” the complaint states. But a reading of the WSJ column gives no indication that was the case. The article instead mentions that the purpose of that meeting was to “solicit opinions.”

Meyer was clearly aware of the optics here. The restaurateur told Eater of that same gathering of restaurateurs during a September 2015 interview and was explicit about its purposes. “The first rule of this meeting is that this is the only meeting we’re ever going to have as a group,” he said he told his colleagues, alluding to the fact that Californian restaurateurs were facing a price fixing lawsuit over a practice to add a healthcare surcharge. He instead depicted his own meeting as an exchange of ideas.

When I hinted at the question of price fixing concerns, he replied that “there’s no collusion, no one’s trying to agree on an outcome.”

5. Everyone else is raising their prices, too

Consumer prices are supposed to rise and fall on the basis of supply and demand, not by an agreement among competitors, which is called price fixing and is illegal. So when Meyer and fellow restaurateurs all raise prices by 20 percent or more within a year, it’s understandable why folks would raise eyebrows.

But here it’s worth stating that consumers are already generally tipping 20 percent, which means that the actual price hike is more gentle. And as this critic has documented, operators around town who employ regular tipping policies are already hiking their prices to cope with skyrocketing real estate and labor costs.

Or put differently: Is the real cost of dinner significantly different at tip-free restaurants, which are supposedly colluding with one another, than at traditional restaurants, which supposedly are not? Only a large scale data-heavy study could answer that question, but anecdotal evidence suggests diners aren’t paying that much more at restaurants without a gratuity line. You’ll actually pay less for a margherita pizza at Meyer’s Marta, where there’s no tipping, than at Stephen Starr’s Upland or Jean-Georges Vongericthen’s ABC Kitchen, after adding on tax and 20 percent tip.

6. Spelling is hard

The authors of the lawsuit have a bad habit of writing “restauranteur” instead of the correct “restaurateur.”