Technology

California bill would force delivery apps to disclose what restaurants pay

Customers would be able to see the commissions that DoorDash, Uber Eats and Grubhub charge to restaurants. Opponents say it would also expose that data to competitors.
DoorDash and Grubhub and Uber Eats stickers
Restaurants that use third-party delivery may pay commissions of up to 30%. | Photo: Shutterstock

Delivery apps like DoorDash and Uber Eats would have to let customers know what restaurants are paying them under a bill filed in California last month.

Under the terms of SB 1490, delivery providers would have to provide an itemized breakdown at checkout showing the fees, commissions and other costs charged to the restaurant for that order.

Restaurants typically pay delivery providers per-order commissions of 10% to 30% to cover delivery and marketing services and processing fees. These charges can make restaurants’ delivery margins very narrow.

The bill is being backed by the Digital Restaurant Association (DRA), a nonprofit that advocates for restaurants on matters of delivery policy. The group said the measure would bring more transparency to the costs of delivery. 

“Restaurants and customers alike deserve transparency to know exactly what fees are charged and who is receiving them,” the DRA said on its website.

But opponents said it would also expose sensitive data to a restaurant’s competitors.

“Large restaurant chains are able to and frequently do negotiate exclusive partnerships with delivery apps, and so disclosing that information to customers would make it publicly available to larger restaurant chains’ competitors,” said Ruth Whittaker, director of civic innovation policy at the Chamber of Progress, a center-left group focused on tech policy. Its partners include DoorDash, Uber Eats and Grubhub.

The bill introduced by Democratic Sen. María Elena Durazo includes a number of other restrictions for delivery providers.

  • Delivery apps would be prevented from penalizing a restaurant for “refusal to use a food delivery platform’s service.” This rule would appear to refer to the apps’ policy of giving more prominent positioning to restaurants that pay a higher commission rate.
  • Apps would not be allowed to limit the dollar value or number of transactions restaurants can dispute when a customer reports an error. (Read more about delivery disputes here.)
  • Apps would be obligated to provide the customer with the phone number or email address for the restaurant.
  • Apps would be prohibited from restricting restaurants’ use of consultants, accountants or legal services to “manage or review information” provided by the delivery company.

It is the latest piece of delivery-focused legislation endorsed by the DRA, which has been linked to Travis Kalanick, the Uber founder and current CEO of ghost kitchen provider CloudKitchens and digital ordering company Otter. Those ties have led to scrutiny of the group’s motivations as it pushes for legislation across the country.

Whittaker said that while SB 1490 is for the most part well-intentioned, there are elements that seem designed to benefit Kalanick’s business interests.

She questioned, for instance, how much customers care what restaurants pay for delivery. “That’s not really information that consumers seem to be clamoring for,” she said, but it could be useful data for CloudKitchens and Otter in the industry's biggest market.

DoorDash in a statement also accused the DRA of looking to legislators to “lend credibility to their self-serving efforts.”

“If passed, this bill would actually hurt California’s small businesses while prioritizing profits for a handful of special interests,” the company said.

DRA Executive Director Joe Reinstein responded in an email that the group is a nonprofit and gets no benefit from fee information.

"Restaurants and consumers don't have the full picture of the fees that are charged to restaurants and how that impacts prices customers pay," he wrote.

The California Restaurant Association, meanwhile, said it was still reviewing the bill and meeting with stakeholders. 

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