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D.C. joined Seattle and San Francisco in passing legislation that institutes a 15 percent cap on the commission fees third-party delivery services can charge restaurants and bars throughout the duration of the city’s public health emergency. The bill, passed by the D.C. Council on Tuesday, needs Mayor Muriel Bowser‘s signature before it becomes law.
Pressure has been mounting on delivery companies to reduce their fees since their services are in high demand. Companies like Uber Eats and Grubhub, for example, typically charge restaurants and bars up to a 30 percent commission fee from every customer’s order, which eats into the paltry revenue those businesses are relying on to stay afloat. The idea behind fee caps, restaurant owners say, is that they more equitably distribute the financial burdens on businesses created by COVID-19.
“Restaurants are trying to eke out some income and they’re finding where third party delivery is involved, all profit is being eaten up by commissions,” Council Chairman Phil Mendelson said Monday.
Espita Mezcaleria managing partner Josh Phillips is grateful for the change. “This delivery service fee cap will make a huge difference in making surviving as a take-out restaurant possible,” he says. Some operators, including Alan Popovsky of Declaration, would have preferred a more aggressive 10 percent cap.
The measure didn’t come without opposition. On May 3, DoorDash, Grubhub, Postmates, and Uber Eats sent a joint letter to Mendelson opposing the fee cap. City Paper obtained a copy.
“Now is not the time to force drastic, untested policy changes to one of the best current lifelines for fast and accessible work opportunities,” representatives from the companies wrote. “A proposed cap on these fees would result in fees for consumers rising and service areas shrinking, cutting off consumers from the services they rely upon in this crisis. Delivery people—who are currently relying on on-demand work opportunities to earn an income—would have fewer work opportunities and lower earnings.”
The legislation explicitly prohibits delivery companies from reducing how much they pay delivery drivers and says they can’t garnish their tips either. There’s precedence. Late last year, D.C. Attorney General Karl Racine sued DoorDash over their payment practices and deceiving consumers about where their tips were going.
Third party apps, according to today’s legislation, “must disclose to the customer, in plain language and in a conspicuous manner, any commission, fee, or any other monetary payment imposed by the third-party food delivery platform on the restaurant.”
A representative from Uber tells City Paper the publicly traded company “operates at a negative margin” and spells out how Uber Eats uses its commission fees. In addition to paying drivers, Uber says it uses the money to pay for on-boarding new delivery people and performing background checks, marketing, technology, insurance, customer service, and Personal Protective Equipment for drivers.
According to the bill passed Tuesday in D.C., third party delivery apps who violate the temporary law are subject to a fine between $250 and $1,000. The D.C. Department of Consumer and Regulatory Affairs is tasked with enforcing the law.
Mendelson said on Tuesday that over the next two weeks the Council will review the emergency measures and amendments it has passed since the beginning of D.C.’s public health emergency and consider whether any of them need more fine-tuning. That leaves the door open for the Council to amend the fee cap legislation the next time it meets.
Picking up food remains the best way to support restaurants right now, according to restaurant owners.