SLA Proposes Laying Down The Law For Grubhub

By Pesetsky & Bookman

SLA issued a proposed Advisory that limits the percentage of sales that licensees can pay to so-called third-party providers

Robert and Max Bookman of Pesetsky & Bookman PC, The Alliance's General and Legislative Counsel and specialists in alcoholic beverage law, have the following update for members on the Alliance's efforts to address the unfair business practices of Grubhub-Seamless:
In a response to the growing controversy about the ever-increasing fees that Grubhub and Seamless demand from our industry, the New York State Liquor Authority, the agency responsible for regulating businesses that sell alcohol in New York State, is taking action. Today, SLA issued a proposed Advisory that limits the percentage of sales that licensees can pay to so-called third-party providers. Third-party providers, such as marketing companies, e-commerce platforms, and delivery services, including Grubhub and Seamless, provide a service to your business, but are not listed on the alcohol license.
If the Advisory is adopted, licensees will be prohibited from paying third-party providers more than 10% of their sales.  This cap applies to all sales, not just alcohol sales. Under the proposed Advisory, if third-party providers ask you to share a percentage of sales greater than 10%, they would be asking you to do something illegal. This would be a major and positive change for our industry, as we currently suffer from unfair demands from companies like Grubhub-Seamless to hand over to exorbitant percentages of our sales. The Advisory would go a long way to curbing this unfair business practice. 
It is important to understand that SLA only has jurisdiction over businesses that have alcohol licenses. If your business does not sell alcohol, you will not benefit from the Advisory. Similarly, since SLA does not directly regulate the third-party providers themselves, the onus will be on industry members to notify companies like Grubhub-Seamless that they will have to lower their percentage rate to come into compliance with the Advisory once it is adopted, if they wish to keep doing business with you. Finally, we note that the Advisory confirms longstanding SLA practice that flat-rate compensation agreements with third-party providers are generally permissible.
SLA is currently accepting comments on the proposed Advisory.  The Alliance will be submitting comments on behalf of the industry, and we welcome any comments that you may have.  A copy of the proposed Advisory can be found here. We expect a final decision from SLA on the proposed Advisory in the next month.

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