The Los Angeles City Council voted unanimously (with one council member absent) this afternoon to move forward with capping the fees that food delivery apps can charge restaurants at 15%.
It's not happening immediately. This is just one step in the process. Today's motion directs L.A. City Attorney Mike Feuer's office to draft the ordinance and it outlines what rules the ordinance should include.
Proposed by councilmembers Mitch O'Farrell and Paul Krekorian, the proposed ordinance won't only cap the delivery fees apps such as Uber Eats, Postmates, Grubhub, DoorDash and Caviar can charge restaurants, it will also limit the marketing and promotional fees apps can charge restaurants to 5%.
Several other cities including San Francisco, New York, Chicago, Seattle, Washington D.C. and Jersey City have already passed similar orders.
During today's approximately nearly hour-long discussion, the council overwhelmingly supported the overall motion but there was some back and forth about a couple of its proposals.
Councilmember Bob Blumenfield pushed back at the cap for marketing and promotional fees. But other council members said that if the ordinance didn't include such a rule, delivery apps would simply increase these fees and make them mandatory for any restaurant using its app. Although Blumenfield proposed an ammendment that would have required a separate vote in this issue, other council members shot that down.
The proposed ordinance also requires more transparency for both businesses and consumers about what fees are being charged and where that money goes. For example, most consumers don't know that most apps take a cut of whatever tips drivers receive via the app.
Also, it's temporary. The limits on delivery fee apps would end 90 days after L.A. lifts its ban on dine-in eating at restaurants.
Once again, the proposed ordinance does not address the fees food delivery apps charge consumers. It only affects the fees these apps charge restaurants on the backend.
Although it's quite possible apps could increase the service charges to consumers to make up from declining revenue from its restaurant partners. In fact, we'd bet on that.
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