United States: New York City Council Approves Permanent Caps On Food Delivery Fees

Late last month (on August 26), the New York City Council voted to approve a bill that serves to permanently cap the commissions that third-party food delivery service providers can charge restaurants. The same bill is also intended to regulate food delivery services by requiring licensing throughout the industry. The legislation now awaits Mayor Bill de Blasio's signature.

Permanent Cap on Commissions

If and when it is signed into law, the bill would permanently extend caps on deliver service fees as authorized by the NY City Council on a temporary basis in May 2020—this in order to protect small businesses. The pending legislation seeks to prohibit delivery service providers from charging restaurants more than 15% per order for delivery and more than 5% per order for all other fees (except for transaction fees) on an ongoing basis. The bill would further prohibit delivery service providers from charging more than 3% per order for transaction fees unless those providers prove that the higher fee reflects a pass-through charge imposed by a credit card company or web-based payment system.

Licensing Requirements

In terms of licensing, the bill, if and when enacted, would mandate that delivery service providers apply every two years for a license with the Department of Consumer and Worker Protection (DCWP) to do business in New York City. Services subject to the licensing requirement are broadly defined to include any website, mobile application or internet service that provides third-party food delivery services from any food service establishment.

Penalty for Non-Compliance

The bill on Mayor de Blasio's desk introduces civil penalties for delivery service providers that charge fees exceeding the cap and authorizes civil actions by the NY City Council or any person against whom a violation was committed.

Assuming that Mayor de Blasio signs the bill, which is expected, New York will join San Francisco as the second city to make temporary, pandemic-era delivery fee caps permanent. For their part, restaurants have generally supported these caps, while delivery service providers argue that the law would be unconstitutional and that it would only serve to increase the costs of delivery, which will ultimately impact restaurants negatively.

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