Third-Party Delivery Regulation Passes
Today the City Council passed a package of legislation the NYC Hospitality Alliance led the fight for to regulate third-party delivery companies and create a fairer and more equitable marketplace for our city’s restaurants. Taken as a package, this is the most far-reaching regulation of this industry anywhere in the country.
The legislation will require third-party delivery companies to provide restaurants with their customer data that they now strategically withhold, require transparency of phone number listings, and prohibit restaurants from being listed on platforms without their permission. It also extends both the prohibition against bogus phone fees and the fee cap until 2022, which we’re working to make permanent. You may read a detailed description of each bill below.
Now that the City Council passed these bills, they will be sent to Mayor de Blasio who we anticipate will sign them into law. We’ll let you know when that happens.
The NYC Hospitality Alliance has worked countless hours over a number of years to lead this battle. We give great thanks to Speaker Corey Johnson and his staff and all the City Council members who sponsored (Councilmembers Gjonaj, Powers, Moya) and supported these bills. We also appreciate all the support of our members who testified at hearings, emailed and called the Council members! We could not have done it without you!
This critical legislation will:
Customer Data: This law requires third-party delivery companies to provide restaurants, upon request, with all customer data of people who order from their restaurants through such platforms. Data includes email address and order history. The customer data must be provided in a machine-readable format, disaggregated by customer, on an at least monthly basis. Restaurants may use this data for their own marketing outside the third-party website, however, they may not the sell data to another party. The customer will have the option to opt out of the data share and request and receive deletion of their data from a restaurant. This legislation will allow restaurants to better own and manage their customer relationships while driving profitable direct delivery and on-premises dining business. Importantly, it will reduce the leverage huge third-party delivery companies have over restaurants when they do not share with restaurants their own customer data. This allows them to be gatekeepers and ensure orders are driven through their channels where they extract hefty fees, especially when it’s not incremental business the third-party delivery company is generating. By not sharing data, it makes it difficult for restaurants to leave third-party delivery platforms because then they lose access to their customers, and then the platforms continue to use their customer data to promote competitor restaurants that stay on their platform. The legislation empowers restaurants to leave exploitative platforms if they choose because they will now have access to their customer data and can market to them directly. Read legislation.
Extend Prohibition Of Bogus Phone Fees: This law extends until February 17th, 2022, the prohibition and penalties on third-party delivery companies if they charge restaurants bogus fees for phone call orders from customer that do not result in an order placed. This law is important because some third party companies have a well-documented history of charging restaurants bogus fees when customers call one of the secondary phone numbers they create for them but do not place an order. We are now working on making this law permanent. Read legislation.
Extending Fee Cap: This law extends until February 17th, 2022, the current fee cap on third-party delivery companies at 5% for listing and marketing a restaurant on their platform, and an additional 15% for conducting the physical delivery of food and beverage. Additionally, the amount of the credit card fee may be passed through to the restaurant. This legislation is so important because third-party platforms were using their immense leverage and their market share over local restaurants to extract fees sometimes exceeding 30% of each order processed, while using other sophisticated techniques to keep restaurants on their platforms, increase fees and engage in other exploitative practices. We are now working to convert the fee cap into a permanent one. Read legislation.
Phone Number Listings: This law requires third-party delivery companies to list a restaurant’s direct phone number wherever they list a restaurant’s phone number. If they create a secondary phone number for the restaurant, they must disclose that it’s not a direct number to the restaurant and explain any fees associated with using the secondary number and if they are imposed on the restaurant or caller. This legislation is important because third-party delivery companies create secondary phone numbers they control for restaurants and then they will collect a fee for the orders placed via that number. Then they use their vast financial resources and technical expertise to promote those secondary numbers ahead of the restaurants own phone number for which the restaurant would not pay a fee for the order. Even customers that aim to call direct to save a restaurant a fee get confused and call the wrong number. Secondary numbers also result in bogus fees being charged to restaurants. This bill provides transparency to the customer to help them order direct when they want, while making them aware of any associated fees incurred to them or the restaurant. Read legislation.
Prohibit Listings Without Approval: This law requires third-party delivery companies from listing restaurants on their platforms without their approval. It will require third-party delivery companies to obtain a written agreement with a restaurant before listing them on their platform. This legislation is important because some third-party platforms list restaurants on their sites without permission, which results in them posting out-of-date menus with items no longer offered by the restaurants, list the incorrect price, out of stock items, items offered for in-restaurant dining only and not delivery, and in cases have listed menus from the wrong restaurants or those that don’t even offer delivery. This misleads and hurts consumers and is hugely problematic because when an order is incorrect, the customer inevitably blames the restaurant, which inadvertently tarnishes their reputation and can cause bad reviews and loss of future customers. Read legislation.