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Lawsuit Alleges Restaurants Engaged in ‘Price-Fixing Conspiracy’ with Tip-Free Model

Did tip-free restaurants collude to break the law?

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A proposed class-action lawsuit filed in California federal court alleges that tipless restaurants in the Bay Area and New York are engaged in a price-fixing conspiracy that unfairly requires consumers to pay more. The proposed class of plaintiffs would include anyone who bought food or drink from the suit’s defendants, a list of restaurants with no-tipping policies (some of which have already been reversed for reasons unrelated to the suit). The group includes Trou Normand and Bar Agricole in San Francisco, Comal in Berkeley, and Camino and Duende in Oakland.

“In the fall of 2014, a handful of Bay Area restaurants agreed ‘as a group’ to eliminate tipping and increase prices by twenty percent,” alleges the suit, first reported yesterday by Law360. “The ongoing conspiracy unlawfully transfers millions of dollars from customers and servers to restaurant owners in violation of federal and state antitrust laws.”

The complaint was brought by one unhappy diner named Timothy Brown, who is represented by David Lavine of The Law Office of Andrew Wolff PC and Guy E. Mailly of Mailly Law. He could be joined by many others, and the class may seek threefold their actual damages, even demanding the defendants pay their attorney’s fees.

According to the lawsuit, the Bay Area restaurants weren’t acting alone: “They are part of a larger conspiracy spearheaded by the Union Square Hospitality Group out of New York City and its founder and CEO Danny Meyer.”

Meyer, an industry-leading restaurateur whose businesses include Shake Shack, has crusaded against tipping generally, attacking the practice as unfair to restaurant workers. His public statements in support of tipless restaurants, such as congratulating Oakland’s Camino in 2015 for “leading the way” by going tipless, are cited by the suit. Camino co-owners Russell Moore and Allison Hopelain had recently learned of the lawsuit and declined to comment.

Tip-free restaurants, like those operated by Meyer’s Union Square Hospitality Group, typically justify their business model in terms of fairness to employees. “We undertook the challenging and lonely journey of introducing Hospitality Included to create clear and transparent growth paths for our people, while beginning to address the decades-long growth of inequality among restaurant professionalism,” a USHG representative tells Eater NY.

But according to the suit, “participating restaurants and a compliant media have portrayed the no-tipping/higher prices 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.” Meyer and other defendants are allegedly in violation of the Sherman Act, the California Cartwright Act, the California Unfair Competition Law and the New York Donnelly Act for their “unreasonable restraint of trade.”

The lawsuit also names trade groups as defendants, including the Golden Gate Restaurant Association, a local entity that represents more than 600 businesses. “Although we have not yet had an opportunity to fully review the lawsuit, GGRA is confident that it has broken no laws simply by facilitating a public discussion of this important issue,” Gwyneth Borden, the association’s executive director, tells Eater in a statement, below:

For some years now, there has been a wide-ranging public discussion about the issue of tipping in restaurants. Laws in some states prohibit wait staff from sharing their tips with chefs, cooks, and other ‘back of house’ staff. This has led to concerns about disparities in income between wait staff and back of house staff. Some in the industry, and in the public at large, have proposed that this disparity can be addressed by eliminating tipping and raising menu prices by a percentage approximately equivalent to the tip. The additional funds could then be used to pay wait staff and back of house staff more uniformly.

As to whether the GGRA and others colluded to end tipping at restaurants, Michael Whiteman, president of NYC-based restaurant consultancy group Baum & Whiteman, tells Eater NY he “doubt[s] one could make the case... which one certainly could do with airline pricing structures or the new hotel cancellation policies.”

According to Borden, the GGRA did “help facilitate discussions of this issue among its members. Some restaurants have adopted a ‘no tipping’ policy, and have found that it works well for them, their staff, and their diners. Others have opted to retain traditional tipping. The choice is theirs.”

The full text of the complaint is below:

No Tipping Lawsuit by Eater on Scribd