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Momofuku, Union Square Hospitality Group Sued for Conspiracy to Fix Prices by Nixing Tips

The suit alleges that the restaurants raised prices ‘at the expense of workers and consumers’

Several prominent restaurateurs at the vanguard of the movement to do away with tipping have been sued for conspiring to fix prices. The lawsuit, filed October 6 in a California federal court, names Danny Meyer’s Union Square Hospitality Group and David Chang’s Momofuku among the 39 defendants, alleging that their participation in the “Hospitality Included” movement and their coordinated efforts to end tipping constitute illegal collusion.

Meyer announced in October 2015 that he would end tipping at all Union Square Hospitality Group restaurants, explaining that the restaurants would instead account for server pay by raising menu prices accordingly. Meyer and others have argued that the policy enables restaurants to pay all employees a living wage — even presidential candidate Hillary Clinton suggested that the prevailing system is unjust — but the lawsuit alleges that “the real aim and effect is greater profit at the expense of workers and consumers.”

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Meyer told the Freakonomics podcast in 2016 that the policy had in fact increased profits at his restaurant in New York City’s Museum of Modern Art, but proponents of the policy maintain that the goal is not profit, but rather a more fair and transparent system for diners and staff alike.

The lawsuit is filed on behalf of a putative class of consumers —named plaintiff Timothy Brown dined at several of the restaurants — though the lawsuit notes that “injured servers and other customarily-tipped employees may also have a viable claim for treble damages.”

The lawsuit does not claim that no-tipping policies are necessarily unjust (the “reasonableness of the conduct or prices is immaterial”) or that a single restaurant pursuing such a policy would be illegal. Instead, the plaintiff claims that the coordination between restaurateurs violates federal antitrust laws.

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Others named as defendants include Eleven Madison Park (which topped this year’s World’s 50 Best Restaurants list), Top Chef’s Tom Colicchio, and Bay Area restaurants Bar Agricole, Trou Normand, Duende, Camino, and Comal, among others. The suit also names San Francisco’s Golden Gate Restaurant Association and the New York City Hospitality Alliance.  

The New York City Hospitality Alliance told The Daily Meal via email that they believe the lawsuit is “baseless on the merit” and that they intend to defend themselves vigorously. Michael Whiteman, president of the New York City restaurant consultancy firm Baum & Whiteman, explained to The Daily Meal that despite the influence of the named restaurants, they make up too small a segment of the industry to constitute effective collusion. Customers who prefer tipped service “will find a yes-tipping restaurant on the very same block,” Whiteman explained.

It remains to be seen whether legal trouble might derail what had seemed to be a growing movement among some of the most acclaimed restaurants in the U.S. — click here to learn about 11 restaurants that banned tipping.

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