The amount of commission Grubhub and other food delivery companies take from participating restaurants may soon be capped at ten percent, as the City Council considers more oversight of the third-party delivery industry.
The Council is considering a set of three bills that are intended to help restaurants and food providers gain control over the fees that third-party delivery systems charge them to use the platforms. Grubhub is the biggest third-party food-delivery player in New York City, with Seamless, LevelUp, AllMenus and MenuPages all under its umbrella.
Councilman Mark Gjonaj, the chair of the City Council’s small business committee, introduced the bills Thursday.
The first bill requires that services such as Seamless or Postmates "disclose to consumers any commission, fees, or other monetary payments imposed on participating restaurants." Restaurant owners have complained that the fees—as much as 30 percent—eliminate any profit margins. Councilmember Ben Kallos is a co-sponsor of this bill.
The second bill requires the food delivery apps to obtain licenses for their services—the licenses would allow the Department of Consumer and Worker Protection to regulate the industry and suspend licenses for any "misleading advertising or deceptive trade practices" and make them subject to penalties yet to be determined.
The third bill tackles the problem of restaurants being charged for every phone call routed through the app platforms—even if those calls do not result in an actual order. The New York Times reported that last year a Philadelphia-based chain of Indian restaurants sued Grubhub, alleging that for at least seven years "the company had charged restaurants on its platform for calls that did not lead to orders." Councilmember Francisco Moya is a co-sponsor on the bill, which would prohibit the charging of fees for incomplete orders.
“This package of bills will go a long way towards ensuring that we have a fair and level playing field for New York City’s locally owned restaurants that are struggling to cope with shy-high commissions from these venture capital-backed Silicon Valley tech giants," Gjonaj said in a statement.
“This arbitrary cap defies common sense – if you tell New York restaurants that they can only sell pizza for a quarter and coffee for a nickel, no one will serve pizza or coffee," said spokesperson for Grubhub John Collins in an email. "Simply put, this bill will slash business to mom and pop restaurants and hurt consumers in the process.”
