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Local governments turn up the heat on delivery companies

Activity this week included a Nevada county's decision to refer Grubhub to the state attorney general’s office.
Photograph: Shutterstock

More governments this week joined the growing chorus of calls for more regulation—and awareness—of the business practices of third-party delivery companies. Activity included limits on delivery fees, a countywide consumer alert and a move in Nevada to refer Grubhub to the state attorney general’s office.

Read on to get caught up.

Attorney general tapped

Officials in Clark County, which includes the Las Vegas Strip and other unincorporated areas of Vegas, moved on Tuesday to refer to the state attorney general a dispute with Grubhub over the county’s delivery fee cap.

The cap approved in August limits to 15% the amount third-party services can charge restaurants for delivery.

But Clark County restaurants said Grubhub has continued to charge fees above 15%, for marketing. 

Grubhub charges restaurants a fee in exchange for a listing on its marketplace. The company has said these marketing fees are negotiable and average between 10% and 15%. It charges a separate 10% fee for delivery.

Commissioners were considering a change to the emergency ordinance that would include marketing fees under the 15% cap. But, because the change was targeted at Grubhub specifically, and could hamper the ability of restaurants to opt in to higher marketing fees, the commission decided instead to refer the dispute with Gruhub to State Attorney General Aaron Ford.

“I think that we should go to the attorney general because I think that this falls under the Deceptive Trade Act,” Chairwoman Marilyn Kirkpatrick said. “The attorney general and the consumer advocate could … enforce something tomorrow.”

A Grubhub spokesperson said the company was adhering to the ordinance as written.

“The Clark County ordinance only applies to fees for delivery services and does not place any cap on marketing or advertising services that local restaurants pay to drive more orders that are unrelated to our delivery services,” the spokesperson said in a statement to Restaurant Business. “We have always been a marketing engine first and foremost that allows independent restaurants to compete against enterprise brands and restaurant chains for diners.”

A representative from the Nevada attorney general’s office confirmed it had received the dispute, but declined to comment.

Consumer alert

The Office of Consumer Protection for Montgomery County, Md., issued an alert Tuesday to warn consumers about “the confusing and costly fees” charged by third-party food delivery services.

The alert cites a Washington Consumers’ Checkbook report that found fees charged by the three largest delivery providers averaged 38% of the total order cost. It goes on to urge diners to order directly from restaurants rather than use a third party.

“By using a restaurant’s own phone number, website or app, people can ensure their money goes to the eatery,” it said, citing the Checkbook report.

County Executive Marc Elrich said the county, which includes D.C. suburbs, is considering legislation to limit the delivery companies, and that the alert was intended to provide consumers “full disclosure and knowledge.”

More fee caps

Two more municipalities approved 15% caps on third-party delivery fees this week.

The Milpitas, Calif., City Council unanimously OK’d the cap, which also limits payment processing fees to 3%, according to Milpitas Beat. It goes into effect Oct. 27 and will last until the Bay Area city lifts its COVID-19 emergency order.

In Westchester County, just north of New York City, the measure also includes a 5% cap on any other service fees, according to CBS New York. It will last until 90 days after a declared emergency.

Milpitas and Westchester join about a dozen other municipalities that have instituted similar caps, intended to help restaurants during the pandemic as delivery has become a key lifeline.

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