Local restaurants got a bit of a break during the pandemic after the D.C. Council passed emergency legislation that took a bite out of the commission fees third-party delivery apps like DoorDash and Uber Eats can charge for their pick-up and delivery services. There was a healthy appetite for additional reform while Washingtonians were homebound and using these apps with greater frequency and restaurants were struggling, so the Council also mandated on a temporary basis that these companies cease their problematic practice of listing restaurants on their platforms without explicit permission.
Some of these measures were tied to the public health emergency, which technically expired this month, so what comes next?
The Council unanimously passed legislation extending some pandemic-related protections and provisions into the fall. The delivery fee cap is tucked into the Eviction and Utility Moratorium Phasing Emergency Declaration Resolution of 2021. Apps can still collect no more than 15 percent commissions on delivery orders and no more than 5 percent commissions on pick-up orders through Nov. 5 of this year. (These companies typically impose closer to 30 percent commission fees for delivery orders.)
Ward 3 Councilmember Mary Cheh has regularly voiced support for making the fee caps last beyond the pandemic and recovery. “I am very interested in seeing the cap on third-party delivery and pick-up fees become permanent, especially if it will result in a stronger and faster recovery for our local restaurant industry,” she says. “Delivery apps are popular and can serve a business purpose, but let’s be clear: They are huge investor-driven companies that hold a significant financial and power advantage over the District’s restaurant industry, which is about 96 percent independent restaurants. Without meaningful protections for restaurants, including reasonable fees, the current arrangement is not sustainable, and many restaurants will not survive.”
The third-party app giants have fought the fee caps every step of the way. When Postmates was slow to comply the city hit them with with several fines. DoorDash tried a tricky approach to get around the fee cap by saying restaurants that participate in a premium service called DashPass are exempt. D.C.’s Office of the Attorney General sprang into action and cited City Paper’s reporting in its cease-and-desist letter to the company, which forced them into compliance.
Expect a legal battle if D.C. moves to make the fee caps permanent. San Francisco became the first jurisdiction to pass such legislation in June. DoorDash and Grubhub quickly sued, calling it an “irrational law, driven by naked animosity and ill-conceived economic protectionism.” There’s much to weigh, according to a report in Eater.
These companies typically argue that fee caps reduce order volume, pass costs on to consumers, lower restaurant revenues, and decrease pay for drivers. That’s cool, but DoorDash’s Tony Xu was the Bay Area’s highest-paid CEO in the most recent fiscal year, earning $413.67 million. And don’t forget those Super Bowl commercials with Cardi B.
Cheh is hoping her colleague, Ward 5 Councilmember Kenyan McDuffie, will add permanent fee cap provisions to his Fair Meals Delivery Act, which prohibits apps from listing restaurants without their explicit permission. “[It] could serve as a strong foundation for a broader protective effort,” Cheh says. “I’ll work with the committee to see what an expansion to the existing bill could look like and encourage any local restaurateurs to share their experiences and submit testimony on the merits of a permanent cap once a hearing is scheduled.”
McDuffie introduced a permanent version of the Fair Meals Delivery Act on April 29. It’s been referred to the Committee on Business and Economic Development, which he chairs, but a hearing hasn’t been set. A spokesperson for McDuffie’s office says they’re focused on the budget and after the Council’s recess, they’ll make decisions about what matters the committee will take up in the fall. They did not comment on whether they would consider adding additional language about commission fee caps.
It might be easier to make a case for making the Fair Meals Delivery Act permanent because the problems it addresses long predate the pandemic. When restaurants are listed without their explicit permission they lose control over how far their food travels before it reaches diners, the ability to turn delivery ordering on and off to control the volume of sales the kitchen can handle, and what menu items are available. The latter is frustrating because when a customer places an order from an outdated or incorrect menu and later learns their dish is unavailable, they may become frustrated with the restaurant, not the delivery platform.
While the D.C. Council weighs how to further regulate delivery apps after the time period covered by the latest extension ends, OAG recently made a small move to make delivery apps more transparent in a permanent capacity. Attorney General Karl Racine and Pennsylvania’s attorney general teamed up with Uber Eats to add a disclosure within the app that addresses price discrepancies between in-app purchases and orders placed directly with restaurants. The latter is almost always cheaper.
When you navigate through the ordering process on Uber Eats and land on the screen that displays the total fee for the order there is a message in fine print that reads: “Prices may be lower in store.”
You be the judge if it’s easy to miss.
“We do think it is a clear and conspicuous disclosure because of placement at check out point,” says Jimmy R. Rock with OAG’s Office of Consumer Protection.
The goal is to get other delivery platforms to follow suit voluntarily. “Our office will continue to look for other apps to make similar disclosures,” Rock says. “If not, we’re prepared to move forward with an investigation or other appropriate actions. That’s going to remain a priority of our office to ensure consumers get similar clear disclosures.”
Rock also asserts that OAG will be keeping a close eye on third-party delivery apps and their practices. “The gig economy has been a sector that Racine has focused on his entire time in office.”