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NYC caps third-party delivery commissions

But Chicago has moved in another direction, mandating that third-party services break down their charges on customers' tabs.
Photograph: Shutterstock

The commissions charged to restaurants by third-party delivery services were temporarily capped today in New York City at 15% while a  limit of 5% was set on marketing contributions and other related fees. 

But a movement to cap commissions in Chicago at 5% was complicated by a directive yesterday from Mayor Lori Lightfoot to impose other obligations on services such as Uber Eats, DoorDash, Postmates and locally based Grubhub. 

The mayor’s directive would require the services as of May 22 to provide delivery customers with a detailed breakdown of all charges, including whatever commission or other fee is charged to the restaurant. The apparent hope is that the knowledge will prompt customers to push back on the services for what they charge restaurants.

“By providing customers with more transparency when they use these delivery services, we can further ensure not only fair business practices for our restaurants but also maintain the innovation that is essential to this industry,” the mayor said in a statement.

In New York City, the City Council also voted today to prohibit delivery services from charging restaurants a fee for fielding customer calls that do not result in an order being placed. In hearings conducted last year, restaurateurs told lawmakers that they are often charged when customers call a delivery service’s number to ask questions in the mistaken assumption they’re actually phoning the restaurant. For instance, a mother might call to ask if the establishment can accommodate her child’s food allergies. In those situations, the patron may not go ahead and place an order.

The legislation passed today in New York specifices that the limits on delivery charges will apply only after a state of emergency has been declared, such as the one now in effect because of the COVID-19 pandemic. The ceilings on fees would be lifted 90 days after the emergency is declared over. New York has not revealed when its current status might change. 

The measured were passed by a large majority of the 51-member City Counci. All but three of the members are Democrats. Mayor Bill de Blasio, also a Democrat, is widely expected to support the legislation.  

“If we do not pass this bill now, we are going to have fewer and fewer restaurants to choose from when we have that option again,” City Council Speaker Corey Johnson said at a virtual press conference Wednesday before the full Council vote.

The actions within the nation’s largest and third-largest cities follow a flurry of activity in city halls to curb the fees charged to restaurants by delivery services. Proponents contend that eating places cannot afford to pay commission rates that typically range from 15% to 40% while they're dependant during the pandemic on takeout and delivery to stay in business. 

Jersey City, N.J., adopted a 10% cap by executive order from its mayor last week. In response, Uber Eats started charging consumers an extra $3 on orders delivered to their door from a restaurant in the city.

The City Council of Washington, D.C., passed a 15% cap during the same week.

Baltimore has asked the services to voluntarily cut their commissions.

Limits are already in place in Seattle, San Francisco and Santa Cruz, Calif.

Grubhub is expected to persue a court challenge of the City Council's right to set a commission cap.  But lawmakers say they are confident their cap will stand.

“We do believe we have the legal authority to do this,” Johnson said.

New York boasts one of the nation’s largest concentrations of restaurants, with more than 27,000 in operation at the end of 2018, according to the website Statista.com.

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