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City Council Proposes a Stricter Fee Cap for Third-Party Delivery Services Like Grubhub

The City Council is taking up a series of bills on April 29 that could introduce a stricter 10 percent fee cap on third-party delivery services

A bike parked on the side of the street that holds to delivery bags that are red and have the letters G and H printed on them.
The NY City Council is looking to cap fees that third party delivery apps like Grubhub collect from restaurants

Following similar orders in San Francisco and Chicago, the New York City Council is now considering the implementation of a 10 percent cap on fees for third-party delivery services like Grubhub and Doordash. In New York, the cap is an expansion on an existing piece of legislation that was introduced by the council in February this year. The New York Post first reported on this new measure.

The biggest takeaway from the new bill, which is set to be debated in an online City Council meeting on April 29, is that fees for delivery companies would be capped at 10 percent of each order during emergency times like the existing COVID-19 pandemic. Previously, the legislation called for a 10 percent cap on fees, but third party apps had the choice of distributing the breakdown of various fees like marketing — a provision that allows businesses to appear higher up in searches by paying delivery apps more — and delivery as they saw fit.

With this emergency provision, third-party delivery companies will only be able to charge restaurants for delivery, and that will be capped at a maximum of 10 percent per order. Violations of this provision will result in fines of up to $10,000 per infraction for delivery companies, which is up from the $1,000 fine during non-emergency times. The previous 10 percent cap provision will remain as is during non-emergency times.

In addition to the emergency delivery cap, there are two new pieces of legislation being added to the six bills that were introduced in February. One would require third-party apps to display the health letter grades of each restaurant on the order page, and the other would require restaurants to disclose how much delivery workers receive in tips, and how much of that tip goes towards their basic wage.

With several co-sponsors on each of these bills, there appears to be a good deal of support in City Council for this package of legislation. The set of bills will first be heard by the council’s small business committee on April 29, which will then be followed by a full council meeting. Mayor Bill de Blasio has to sign it into law before the legislation can be enforced in NYC.

Andrew Rigie — the executive director of the NYC Hospitality Alliance, a group that represents thousands of restaurants in the city — hailed the City Council’s decision to consider the emergency cap.

“When companies like Grubhub and Seamless are exploiting restaurants during a pandemic you know It’s past time to cap their fees at 10 percent,” Rigie tells Eater in a statement. “We urge the City Council and Mayor de Blasio to pass this legislation ASAP.”

There’s been a growing pushback from restaurants and city legislators against third-party delivery services for months now with a particular focus on the 10 to 30 percent commission these services charge restaurants per order. Restaurants say this already cuts into their very slim margins, and calls to rein in third-party apps have reached a new level of urgency as the restaurant industry in New York faces a $3.6 billion loss in sales this month.

So far delivery companies only seem to have made minor concessions. A $100 million relief announcement from Grubhub entailed a deferral of fees, not a cancellation. DoorDash says it has slashed its commission and marketing fees by half through May.

San Francisco was the first major city to enact an emergency cap on fees; Mayor London Breed announced a 15 percent cap for delivery services on April 10. Chicago’s measure — which was announced on Wednesday — is even stricter than NYC’s, capping fees at five percent per order with penalties for first violations ranging between $1,500 and $3,000. In New York, it’s unlikely that any measure will be enacted at least until May.

At the time of publication, both Grubhub and UberEats had not returned a request for comment. Doordash issued the following statement to Eater, though it made no mention of the emergency cap:

Everyone needs to step up to help our communities during this crisis, which is why DoorDash is providing more than $100 million in commission relief and marketing support to restaurants, including cutting commissions for small restaurants in half through May. At the same time, Dashers are on the front lines, and we know that helping to protect them is critical, which is why we are providing personal protective equipment such as masks and hand sanitizer, access to telehealth, and financial assistance to those who are sick or at high risk.