Three food delivery companies are suing New York City over its cap on commissions the companies can charge restaurants to use their services. According to a Wall Street Journal article, DoorDash Inc., Grubhub Inc., and Uber Technologies are “contending that the fee cap is harmful and constitutes government overreach.” I’m glad companies are pushing back on government interference in the market; businesses and consumers should be decision makers in the market, not lawmakers.
St. Louis City has one of these caps too. The St. Louis Board of Aldermen passed an ordinance in July of 2020 that sets a cap on fees that third-party delivery services charge restaurants at 20 percent (up from the 5 percent originally proposed). This ordinance includes a sunset measure that ends the cap 60 days after the city’s health proclamation has been lifted.
Previous agreements between restaurants and delivery services generally set fees higher than 20 percent. The city’s health proclamation is still in place, so this arbitrary cap has been intruding in the market for about 15 months. As predicted, consumers have been experiencing the effects. For example, DoorDash added a regulatory response fee on all delivery orders in St. Louis City (and other places across the country) with a spokesperson noting that this fee was necessary to pay drivers appropriately amid pricing regulations.
The contention between delivery companies and lawmakers seems to exist nationwide, and it’s coming to a head with this lawsuit. I’m not a lawyer, but I think workers and consumers have paid the price for lawmaker interference in the market for long enough. St. Louis City should remove this cap now to avoid any potential repercussions from the lawsuit and to honor market arrangements between delivery services and restaurants.
