Restaurants in DC received messages this week from 3rd party delivery apps that their commissions have changed to increase over 15% they’ve had for nearly 3 years. Many restaurants learned their commission was going up from 15% to 30% (see Pie Shop with DoorDash). [Edit: apparently 55% rate was for restaurants who ship their goods across the country] Restaurants who use UberEats were informed that they could keep the 15% commission under the “Lite” package but they would no longer show up in the feed or under different cuisines, only if a customer specifically searches for the restaurant (25% or 30% commission options are available). (see below). What happened?
Since May 14, 2020, DC (similar to NYC, SF, Seattle and other cities) has prohibited 3rd party restaurant delivery apps (DoorDash/Caviar, UberEats/Postmates, Grubhub) from charging restaurants more than 15% commission for delivery orders. This has been enacted via a series of temporary and/or emergency laws.
Now, via the Fair Meals Delivery Act of 2021, which became effective on Friday, March 10th, the 15% commission cap is permanent. But there’s a catch – similar to permanent laws in Seattle and SF passed since August- essentially it just means that a delivery app must offer a basic 15% commission tier option.
Specifically, apps just have to offer restaurants “the option to obtain core delivery service” at a 15% max commission cap, and they don’t have even have to offer existing contracted restaurants this option until April 10, 2020.
What exactly is “core delivery service”? Here’s how the law defines it:
a service that lists a restaurant and makes the restaurant discoverable on all modalities or platforms offered by a [3rd party delivery service]
The word “discoverable” is not defined in the law.
Mary Cheh, in her last month as Ward 3 Councilmember, offered an amendment during the Council’s 2nd reading of the law that would have, among other things defined the term “discoverable” which would require that “a restaurant’s name is included in any lists or pages within [the app]” such as “the primary listing of restaurants on the platform’s home screen, text-based search results, lists of restaurants corresponding to cuisine type or other categories, lists of a user’s purchase history, and any other lists curated by” the app. Her amendment also would have prohibited apps from listing those who opted in the basic 15% cap tier at the bottom of the list. She said that without this amendment, “the system set up by this bill would allow [apps] to create a ‘race to the bottom’ scenario” where the “15% tier would turn into a sham offering, and the 25% tier would effectively become the most basic level of service.” [EDIT- Apparently, this amendment was written but was not officially introduced nor was it considered after late discussions with McDuffie’s staff.]
So far, Cheh’s concerns have appeared to be realized.
Of course, the fact that the 3rd party apps have sued cities for these caps (Grubhub said they would drop their suit against SF when they added the “core delivery service” exception) likely has a lot to do with this language.
Will be interested to see if DC Council (or DC’s Attorney General) addresses some of the concerns restaurants are raising.
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