Many cities capped commission fees during the Covid-19 pandemic. As they consider making the emergency rules permanent, Grubhub and Seamless are fighting back.
Even before the Covid-19 pandemic slammed the door closed on indoor dining and forced many restaurants to pivot to delivery, business owners were openly revolting against high-commission platforms like Grubhub and Seamless. Some slipped notes into their customers’ meals imploring them to call instead of ordering online. Others took the fight to city council.
But it wasn’t until this year, when the pandemic began, that many cities began moving to impose (temporary) fee caps on the platforms. By June, New York, Los Angeles, San Francisco, Washington, D.C., Seattle, and others had all set commission limits, generally ranging from 15 to 20 percent of a diner’s total order. At the same time, California lawmakers’ long-term push to force platforms like UberEats and DoorDash to classify their drivers as employees began heating up.
If the pandemic accelerated lawmakers’ efforts to reign in the platforms—and make life a little easier for their drivers and restaurant clients in the process—it also placed real limits on the delivery apps’ potential profit margins. It has become clear in the last couple of weeks that the tech companies don’t plan to accept these changes without a fight: Uber and Lyft threatened to cut off service in California, and Grubhub launched a petition protesting the “food delivery tax” in New York City.
New York’s cap on delivery fees—which totaled 20 percent, including 5 percent for marketing and 15 percent for delivery—was originally set to expire in September, the New York Post reports. New York City Council met last week to consider extending the rule until 90 days past the date on which restaurants are allowed to serve indoor diners at 100-percent capacity. That date is probably a long way in the future, as there’s still no timeline for the return of any indoor dining in New York City.
In response, Grubhub and its subsidiary Seamless have launched an online petition targeted at consumers. In a form letter addressed to “your officials,” the company is encouraging people to protest the cap (which it’s calling a “tax”) because it claims the fee limits will raise prices for eaters, send fewer orders to restaurants, and mean less earnings for delivery workers. The signoff is concise: “Get your hands off my deliveries!” Grubhub is also buying targeted digital ads in the districts of council members who support the caps, the Post reports.
Councilman Mark Gjonaj, chair of the city council’s Small Business Committee, responded to the petition in a press release. “Make no mistake about it,” he wrote. “This is a corporate attempt to gaslight New Yorkers and blur the truth.”
On the West Coast, as we reported last week, a judge gave Uber and Lyft a 10-day deadline to reclassify their drivers as employees, meaning the companies would be forced to offer workers minimum wage, unemployment insurance, and sick pay. In response, both companies warned that they would halt their services in California until the November election, when a ballot initiative they sponsored would exempt drivers from the state’s new worker classification law.
It became clear in recent days that this was no idle threat: Lyft said it would halt rides at 11:59 P.M. on Thursday evening if its appeal failed. Hours before the cutoff, a state appeals court handed the companies a win by extending their deadline to reclassify drivers as employees, CNBC reports.
Similar court battles targeted at food delivery services like Instacart and DoorDash are currently playing out in lawsuits filed by city attorneys in San Francisco and San Diego. Massachusetts Attorney General Maura Healey has challenged the companies in her state.
Drivers, restaurants, and advocates have been fighting to put guardrails on the delivery platforms’ business practices for years. Lawmakers finally seem to be catching up. Whether the tech companies will comply with the new rules—and whether their already-unprofitable businesses can survive if forced to pay fair wages and keep commissions low—remains to be seen.