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Restaurants that participate in a premium service offered by DoorDash found out earlier this week that their commission rates will increase in some cases, starting Dec. 9. DashPass is a good deal for diners who order frequently. They pay $9.99 a month in exchange for unlimited deliveries with zero fees on orders totaling $15 or more. Once enrolled, they can cruise DoorDash looking for restaurants with check marks, indicating that a restaurant has opted into DashPass.
As of late September, there were five million DashPass diners nationwide. Restaurants pay extra to participate in DashPass because it gives them greater visibility to these committed customers. The District, however, capped the commission fees third-party delivery apps can charge during the public health emergency at 15 percent. Companies like DoorDash, Uber Eats, and Grubhub typically charge closer to 30 percent. The goal of the fee cap, which several other jurisdictions have adopted since the start of the pandemic, is to keep more money in the pockets of restaurants at a time when their on-site operations are curtailed to slow the transmission of COVID-19.
The D.C. Council passed emergency legislation including the commission fee cap on May 5 and it took effect after Mayor Muriel Bowser signed it on May 15. Postmates, which was just acquired by Uber, failed to comply immediately, resulting in fines from the Department of Consumer and Regulatory Affairs. But few restaurants have flagged commission fee compliance issues with City Paper since the summer.
Then earlier this week several restaurants participating in DashPass shared a notice they received from DoorDash. “Recently, local policymakers passed a price regulation for your area, so the rates you pay in exchange for the services DoorDash provides are lower than your contracted rate,” it reads. “The regulation is only applicable to Classic orders and does not apply to the DashPass program, which is an optional, premium offering and separate from DoorDash’s core services … Effective Wednesday, December 9th, we will begin charging DashPass orders at the contractual rate in your original agreement with DoorDash.”
The owner of a D.C. Mexican restaurant says they’ll go from paying 15 percent to 30 percent on DashPass orders next week. Both the customer and the restaurant must be enrolled in DashPash in order for the higher commission fee to kick in, according to DoorDash.
“It seems dishonest to use a promotional program that we already pay extra to be included in to get around local restrictions that are keeping our business alive, particularly as sales are dropping dramatically due to winter and the spike in COVID cases,” the restaurant owner says, requesting anonymity out of fear of retaliation. “Our sales mix is trending much more towards delivery as people get colder and more afraid of the virus, so this hurts more now than it ever could.”
DoorDash has repeatedly come out against commission fee caps, describing them as a one-size-fits-all solution that impacts their ability to provide quality service and pay for costs like driver pay, driver background checks, customer and merchant support, and occupational accidents. They say their drivers average $22 during hours they’re active. (Attorney General Karl Racine just settled a lawsuit with DoorDash requiring the company to pay $2.5 million following claims they misled D.C. consumers and pocketed drivers’ tips.)
According to DoorDash, DashPass is a “premium marketing experience” and shouldn’t be beholden to the same 15 percent commission fee cap as what they call “classic orders.” They emphasize that restaurants can opt out of the program at any point. At the same time, they say they understand restaurants are going through unprecedented challenges and hope to be supportive.
But local legislators and agencies aren’t convinced that DoorDash should get a pass on this one. There’s no language in the legislation that exempts programs such as DashPass and one could argue DashPass still functions as a “third-party food delivery platform,” as defined in the bill: “Any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the same-day delivery or same-day pickup of food and beverages from, restaurants.”
“This is pure greed and excessive profit-seeking at the expense of our restaurants and residents,” says Ward 3 Councilmember Mary M. Cheh, who drafted the language for the fee cap legislation in the spring with Council Chairman Phil Mendelson. “If there is a gap in the law that would permit DoorDash to do this, and I most definitely think there is not, then I will move swiftly to amend the law and close any loophole.”
DCRA, the enforcing agency, says it continues to ensure third party delivery services abide by rule that’s still in effect until the public health emergency is over. According to a representative, the mayor’s order clearly states it shall be unlawful for a person to cause a third-party food delivery platform to charge a restaurant a commission fee for the use of the platform’s services for delivery or pick-up that totals more than 15 percent of the purchase price per online order.
The agency encourages all restaurants and customers who are charged more than the 15 percent commission fee to contact DCRA or complete this business complaint form.