New York City Council Puts New Limits On Food Delivery Apps

New York’s City Council overwhelmingly approved a series of bills Thursday aimed at limiting the scope of third-party delivery apps, following concerns they’re taking advantage of restaurants devastated by the COVID-19 pandemic, even though they also helped them survive.

The council extended until February 17, 2022 a cap imposed during the pandemic of 15% for deliveries and 5% for other services, such as marketing. The cap was set to expire next month. That would have allowed apps to charge commission as high as 30-35% combined, depending on services.

“Small businesses should not be pressured into accepting these fees in order to remain viable and competitive,” said Queens Council Member Francisco Moya, who sponsored the bill. “To allow the temporary cap to expire would completely handicap the recovery of so many businesses that are just starting to get back on their feet.”

Andrew Rigie, executive director of the NYC Hospitality Alliance, praised the council for reining in what he called “the exploitative business practices of certain, mega size third-party delivery companies” despite “misleading statements” from the industry.

Delivery app companies strongly opposed the extension. GrubHub spokesman Grant Klinzman called fee caps “arbitrary price controls” and predicted they’d “result in damaging and long-term consequences for locally-owned businesses, delivery workers, diners, and the local economy.”

Many of the apps give restaurants a menu of options at varying price points. DoorDash noted that it offers a basic plan in which restaurants are charged 15% per delivery, a fee that covers background checks, insurance, and payment to its delivery workers.

Third-party delivery services worried the city would enact a permanent cap like San Francisco did on the fees charged to restaurants. Bronx Council Member Mark Gjonaj said a temporary extension should “withstand any challenge” by the apps.

Other Limits Approved by the Council

Another bill approved on Thursday requires the apps to get written approval from a restaurant owner before listing their business. This bill also bans the delivery platforms from requiring restaurants to compensate them for damages that occur after food or beverages leave the restaurant.

The council approved another bill that requires the apps to share customer data with restaurants, after the industry complained its members should be able to know their customers. This information includes a customer’s name, phone number, e-mail address, delivery address, and the contents of their orders.

The delivery companies raised concerns about customers’ privacy rights, and so did groups including Gay Men’s Health Crisis and the Haitian American Caucus, which said 30% of its members are immigrants and it would not want them put in any compromising situations.

DoorDash suggested that customers should be required to opt into having their data shared with a restaurant, instead of opting out. A spokeswoman noted the legislation does not take effect for several months, and said, “we will continue to fight to protect the privacy of our customers.”

The legislation prohibits restaurants from selling customer information without their consent. Despite passing easily, the bill drew enough concern that Brooklyn Council Member Carlos Mechaca said he’d work with its sponsor, Keith Powers of Manhattan, to add stronger protections so New Yorkers’ data can’t get into the hands of other entities, like Immigration and Customs Enforcement.

Jonathan Forgash, executive director of Queens Together Restaurant Association, praised the package of legislation. “These laws will help our restaurants gain control of their customer data, reduce costs, and succeed in business,” he said.

Another bill extends a pandemic-era restriction through February on charging customers for phone calls that don’t result in an order. The council also approved new legislation aimed at stopping apps from listing phone numbers that are not really linked to an individual restaurant, but appear to be and end up costing customers money when they call.

The city is allowed to fine companies anywhere from $500 to $1,000, depending on which laws they break.

Beth Fertig is a senior reporter covering the city’s recovery efforts at WNYC. You can follow her on Twitter at @bethfertig.

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