The Seattle City Council voted on Tuesday to permanently impose a 15% ceiling on the food delivery fees charged by Uber eats, doordash, grubhub and other services to restaurants.
Cap has been implemented since April 2020, when it was part of the emergency order when the epidemic broke out. This means that with the increase of delivery orders, the financial difficulties faced by small enterprises under the closure of orders will be alleviated.
Without restrictions, it is reported that some express companies charged up to 30% of the fees to restaurants before the outbreak of the epidemic.
The new legislation, initiated by congressmen Dan Strauss and Alex Pedersen, stipulates that if restaurants purchase additional non delivery services, such as marketing and consulting, delivery services will charge more.
San Francisco approved a similar exception last month, amending the law to allow higher fees in such cases. San Francisco faces litigation from grubhub after it made the 15% fee cap permanent in June 2021. Grubhub and other companies also sued New York City last year after it passed a permanent cap on delivery costs.
Strauss said before the vote: “we know that limiting food distribution fees during the epidemic is beneficial to our smallest enterprises and consumers,” he added, adding that this “is still a good foundation for long-term recovery.”
The Seattle City Council passed the bill 7-0, with members Theresa mosquita and Lisa Hubbard absent.
Express service companies contacted by geekwire generally accepted the new Seattle law and added an opt out clause, even though they were not satisfied with the legislative process.
For example, Uber said in a statement that it “hopes that the city council will adopt a more cooperative approach”. However, the statement added that Uber supports “the permanent delivery fee language, which allows restaurants to have flexibility in choosing the services that best suit their business, and provides restaurant owners with opportunities to succeed in an increasingly competitive industry, while paying for the services they actually need.”
The city “recognizes that restaurants need more choices, not fewer choices, and adjusts price controls accordingly during the pandemic,” said a spokesman for grub, adding that the Seattle decree will “retain the ability of each restaurant to choose key services to help its business grow, including marketing, advertising, consulting and delivery.”
According to the analysis of Seattle City Council staff, this regulation helps prevent food distribution platforms from transferring costs to consumers. The analysis shows that after raising a similar temporary fee cap nationwide, the food platform increased the surcharge of $1.00 to $2.50 to consumers’ bills.
Doordash supported this provision, but warned that “price control may lead to increased customer costs, reduced orders from local restaurants, and reduced opportunities for Dashi people to make money. We are eager to work with decision makers to find solutions that better support restaurants, customers, and Dashi.”
According to the Council, the profit margin of restaurants is usually only 10% or less, and they increasingly rely on food distribution to maintain business. Their bargaining power in negotiating cost reduction is also limited.
Jay inslee, the governor of Washington state, implemented a similar statewide cap during the 2021 pandemic. Minneapolis and Philadelphia have introduced a permanent ceiling of 15% on food delivery fees.
In May, the Seattle Commission also passed legislation that stipulates minimum wages and other protective measures for gig employees who fulfill orders from on-demand service providers.
When the epidemic began, many restaurants accepted express companies as a way to sell food, and their restaurants were still empty, but the problem of inequality from fees to services soon became a problem. For example, some restaurants complain that delivery companies scrape menus onto their apps without asking the manager or boss in advance.
In response, the Seattle City Council enacted new restrictions last year, requiring delivery services to reach an agreement with restaurants before allowing users to order takeout food.