Delivery Apps to 'Vigorously Fight' to Take More Money From Struggling Restaurants

New York City made a cap on app commissions permanent, and gig companies aren't happy.
August 30, 2021, 1:44pm
Delivery Apps to 'Vigorously Fight' to Take More Money From Struggling Restaurants

On Thursday, the New York City Council made permanent a cap on delivery commissions extracted by third-party delivery apps. The measure was originally passed during the pandemic as emergency relief for restaurants struggling to stay open as apps continued to take commissions of up to 30 percent.

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The NYC cap limited fees to 20 percent, 15 percent for delivery and 5 percent for additional fees, a level maintained by the new bill. It also caps transaction costs at 3 percent and requires proof of credit card processing fees if that cap is exceeded. It also requires the Department of Consumer and Worker Protection to submit a report every two years to the Mayor and Speaker of the Council that would recommend how to adjust or preserve the bill's cap on fees.

"We are not here to enable billion-dollar companies and their investors to get rich at the expense of restaurants," said Councilmember Francisco Moya, who sponsored the bill, during Thursday’s Council meeting, according to Restaurant Business

“The fact is, permanent price controls are unnecessary and unconstitutional, and will hurt small businesses, delivery workers, customers and the local economy. New York’s restaurants need choice more than ever, and this dangerous government overreach will severely limit the options small businesses rely on everyday to succeed.” a DoorDash spokesperson told Motherboard.

"This permanent price control is flagrantly unconstitutional and will hurt local restaurants, delivery workers and diners across NYC," a GrubHub spokesperson told Motherboard. "We will vigorously fight this illegal action."

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Shortly after the New York City cap’s introduction as a temporary measure in May, a class action lawsuit in New York City filed by a Manhattan bakery alleged DoorDash, Uber Eats, and Grubhub were violating the fee cap by restructuring how they collected fees from restaurants. The lawsuit also alleged that the companies inflated their fees for credit-card processing as well.

At the time, the companies dismissed the lawsuit. Grubhub told Restaurant Business the lawsuit was full of "baseless allegations" while DoorDash said the lawsuit's claims were "entirely wrong."

Permanent caps on the commissions that gig work apps extract from restaurants is a growing movement. In June, San Francisco became the first city in the United States to pass a permanent cap on commissions when its Board of Supervisors approved a cap at 15 percent on delivery fees. The original cap, also introduced as an emergency measure, was set to expire on August 15.

Nationwide, temporary measures have emerged in Chicago, Las Vegas, Los Angeles, Portland, Seattle, Washington D.C., and more. In response to these capped fees, third-party apps such as UberEats and Doordash have responded by charging customers more with new fees where these caps are present. 

"Unfortunately, this is why in some markets, where state and local governments have passed price controls, we've needed to begin charging customers an additional fee," DoorDash wrote in a March blog post defending its price hikes and containing a video arguing that commissions help the service to operate and pay for things like PPE. 

Uber Eats did not immediately respond to Motherboard’s request for comment.