A new bill introduced in the New York state legislature this week would prevent food delivery apps from listing restaurants without their written permission.
The legislation, which is sponsored by upstate Assemblyman John McDonald III and Manhattan State Senator Brad Hoylman, is similar to a law that just went into effect in California. The bill would fine the apps $500 each day a restaurant is listed after requesting to be removed.
Hoylman described the measure as "straightforward consumer and business transparency," designed to protect consumers from false advertising, and restaurant owners from negative reviews prompted by angry customers who place orders that the restaurant can't fulfill.
"I think the consumer and the restaurant should be getting what they're paying for. There's no place for deceptive practices, particularly in the middle of the worst business slowdown for restaurants in recent history," Hoylman told Gothamist.
Andrew Rigie, the executive director of the NYC Hospitality Alliance, called the bill "incredibly important," and said he frequently hears from restaurant owners about the problems that come from being listed without their knowledge.
"It creates a problem for customers and tons of issues for restaurants. It's absurd that we even need legislation to regulate these practices, but it's another example of the egregious business practices of certain third party delivery companies," Rigie said.
Grubhub, which owns Seamless, MenuPages, and multiple other directory services, controls at least 50% of the market share for food deliveries in New York City, according to a recent analysis. For the third quarter of 2020, the company posted revenues of $494 million, a 53% increase from the year before.
A spokesperson for Grubhub, Grant Klinzman, said in an emailed statement that the company adds unaffiliated restaurants "when we see local diner demand for delivery so the restaurant can receive more orders and revenue from deliveries completed by our drivers. This is a model that other food delivery companies have been doing for years as a way to widen their restaurant supply, and we’re using it as well in some markets to create a level playing field."
"We support banning the practice for all companies to ensure a level playing field," Klinzman said, adding that if a restaurant does not want to be listed, they should email [email protected].
Uber Eats, which controls a little more than a quarter of the city's delivery market share, and purchased Postmates last month, declined to comment, while DoorDash, the next largest service by market share (which also owns Caviar), declined to comment specifically on the legislation.
"DoorDash is proud of the role our platform plays in helping restaurants connect with new customers and generate additional revenue, particularly during these tough times," a spokesperson wrote in an email.
Last year, the City Council capped the fees that delivery apps could charge restaurants at 20% per order: 15 percent for delivery orders, 5 percent for all orders placed through the app. Some app companies had been charging as much as 30%.
Asked if he would support charging consumers fees to help offset the fees the delivery apps charge the restaurants, Hoylman responded, "I'm not interested in increasing fees, everyone's hurting as it is now. But I do want these agreements between restaurants and food delivery apps to be legitimate. These delivery apps are feasting like parasites on an industry that's already down for the count."
Hoylman said he planned to push for an array of measures aimed at helping small business owners.
"For starters we could provide rent relief to commercial tenants," Hoylman said, pointing to his "Save Our Storefronts" legislation that would lower commercial rents and base them on the revenue the business earns.
"Fundamentally we need additional revenue to make that happen, we are $16 billion plus in the hole in New York State," Hoylman continued. "At the same time, we've got some billionaires who have increased their net worth by 10, 15, 20%, who live right here. How do we tap into that excess to help struggling small businesses and restaurants? Well, that's the biggest challenge that Albany faces as we head back to session."
Rigie said he believes the delivery app listing bill will end up being "a small piece of a much larger legislative package" aimed at reining in delivery app companies. He said that apps should be forced to share valuable customer data with restaurants, and that the deluge of search engine advertising that steers New Yorkers towards the apps should be curtailed.
"By nature, third party delivery is not bad for restaurants. It is the exploitative business practices," he said.
