House votes to cap food delivery fees
15 percent cap would affect apps like GrubHub and DoorDash
THE MASSACHUSETTS HOUSE on Wednesday passed a bill that would temporarily cap the fees that delivery services can charge restaurants during the coronavirus pandemic.
The provision was part of a larger bill aimed at helping restaurants recover from the economic devastation caused by COVID-19-related shutdowns.
House Ways and Means Chair Aaron Michlewitz, a Boston Democrat, said many small restaurants are not equipped to weather the forced closures. “It’s paramount that the Legislature eases the burden on restaurants in whatever way we can,” Michlewitz said.
The bill passed unanimously by a vote of 156-0.
Because many of these restaurants had no infrastructure set up to offer online ordering or delivery, they have relied heavily on third party mobile apps to list their restaurants, process orders, and deliver food. Four companies – GrubHub, DoorDash, Uber Eats, and Postmates – dominate the market. DoorDash temporarily cut its commissions during the pandemic. But the other companies have been charging restaurants commissions of up to 30 percent of the price of the meal for each order they deliver.
The House bill would cap delivery fees at 15 percent of the order price until 45 days after the COVID-19 state of emergency ends.
An amendment adopted on the House floor would cap other fees at 5 percent – if the app, for example, lists a restaurant and processes online orders but the restaurant employs its own delivery people. (Today, a company like Uber Eats can charge 15 percent for marketing and order processing, even without delivery.)
As CommonWealth previously reported, restaurants had complained that they were losing money on meals that were delivered by the apps, because of the large commissions.
A handful of cities nationally – including Seattle and San Francisco – capped delivery service commissions during the pandemic. Some Massachusetts municipalities were considering it.
State Rep. Michael Day, a Stoneham Democrat who introduced a standalone bill to cap delivery commissions, said during the House debate that there is a gross imbalance in negotiating power between the restaurants and the delivery apps. The restaurants were shut down quickly, often with no delivery models in place. In normal times, Day said, restaurants could move to web-based ordering and delivery “at their own pace at an expense level they can absorb.” Now, the only way they can continue even reduced operations is by contracting with these vendors.
The delivery contract, Day said, “wipes out their margins entirely and leaves restaurants preparing food for no profit at all.”
“Any arbitrary cap – regardless of the duration – will lower order volume to locally-owned restaurants, increase costs for small business owners, and raise costs on customers,” said GrubHub spokeswoman Jenna DeMarco. “Delivery workers would have fewer work opportunities and lower earnings.”
DeMarco added, “We also believe that any cap on fees represents an overstep by local officials and would not withstand a legal challenge.”
In addition to imposing a cap on delivery fees, the bill would also let restaurants sell “cocktails-to-go” with takeout food orders. A law passed in April already lets restaurants sell beer and wine with takeout.The bill would authorize some changes to state licensing and local zoning procedures to make it easier for restaurants to open outdoor seating. It would temporarily waive late payments for restaurants that fall behind on state meals tax payments.
The bill now goes to the Senate for consideration.