Today the NYC Hospitality Alliance submitted the following memo of support to the NYS Senate Consumer Protection Committee on two bills we’ve advocated for to protect restaurants from predatory business practices of certain third-party delivery companies.
Prohibiting 3rd Party Delivery Listing
By NYC Hospitality Alliance
The first bill prohibits third-party delivery companies from listing a restaurant on their sites without permission. The second establishes a statewide delivery cap that mirrors the NYC cap we got enacted last year and which we’ll keep fighting for to get made permanent. We’ll advocate to get these bills enacted into law ASAP and will keep you informed.
PROHIBITING THIRD-PARTY DELIVERY COMPANIES FROM LISTING RESTAURANTS WITHOUT THEIR APPROVAL: SUPPORT
We support S1630A which requires third-party delivery services (“3PDS”) to have a valid agreement with a restaurant before they advertise, promote, or sell a restaurant’s food and beverage products on their platform. This is important because certain third-party delivery companies are listing restaurants on their sites without their permission, creating problems for restaurant owners, workers and customers. For example, 3PDS’s will pull restaurants’ menus from the internet without their permission and list them on their website to siphon off customers who would have otherwise ordered directly from a restaurant and not paid a fee or pay a lower fee. The direct restaurant / customer relationship is so important because it enables restaurants to provide better service and even offer perks such as discounts and complimentary items and offers to new and loyal customers. Sometimes the menus that 3PDS’s list on their websites are out-of-date and contain menu items no longer offered by the restaurants, lists the incorrect price, are out of stock, are offered for in-restaurant dining only not delivery, and in cases have listed menus from the wrong restaurants or those that don’t even offer delivery. This obviously misleads and hurts consumers and is hugely problematic for restaurants because when an order is incorrect, the customer inevitably blames the restaurants, which inadvertently tarnishes their reputation and can cause bad reviews and loss of future customers. Furthermore, restaurants should have the right to determine which 3PDS companies they work with, not only because it’s a proper business practice, but also because all parties should have a level of trust and transparency that the entity and person who delivers their food engages in proper food safety protocols, etc.
STATEWIDE THIRD-PARTY DELIVERY FEE CAP AND URGE IT BE MADE PERMANENT: SUPPORT
We also support S1554B, which prohibits third-party food delivery services (“3PDS”) from charging restaurants a fee that totals more than 5% for listing/marketing/transacting orders on their sites; permits an additional fee of no more than 15% for conducting the physical delivery of an order; and allows for no additional fees (with the exception of credit card fee passthroughs) which would undermine the very need and intent of enacting a fee cap. Fee caps are needed because 3PDS spend hundreds of millions of dollars to acquire market share, which in theory should reduce their fees, but instead has allowed them to increase fees on restaurants and siphon off restaurants’ direct customers by using sophisticated SEO and questionable marketing techniques. They also withhold customer contact information, creating a wall between the restaurant and their customers, making them reliant on the 3PDS…essentially meaning that if a restaurant leaves the platform, they lose access to their own customers, who will then be directed to competitors. In fact, because of this power the 3PDS have over restaurants, they have sometimes even been able to charge restaurants more in fees than a restaurant earns off an order. Basically, restaurants can’t afford to be on the platforms, but they can’t afford not to be on them, and they are sometimes referred to as an equivalent of payday lenders in the restaurant and technology sector.
Although this bill essentially mirrors an incredibly important 3PDS fee cap law enacted in New York City earlier in 2020, and we support its passage immediately, we would also urge the Legislature to consider amending it to make the 3PDS fee cap permanent now, not only temporary for the extent of the COVID-19 state of emergency and 90 days thereafter. The truth is, this fee cap was desperately needed before the pandemic, became increasingly important during the crisis, and will become ever more necessary post-pandemic because this crisis has only further empowered these billion-dollar 3PDS, while restaurants and so many small businesses struggle. The major acquisitions within the 3PDS industry have consolidated power among a couple 3PDS and strengthened their leverage to gain market share and continue to increase their leverage and fees on independent restaurants. Furthermore, in addition to making the cap permanent, we would also propose (via amendments or new, standalone legislation) provisions requiring 3PDS to provide access and ownership of customer data and information to restaurants immediately, thus creating and fairer and more equitable marketplace.