Chicago Strives for Transparency in Third-Party Delivery Fees
Chicago residents ordering delivery from their favorite delivery service will notice a new addition – an itemized cost breakdown of each transaction including the commission or service fee paid by the restaurant to the third-party delivery company.
Mayor Lori E. Lightfoot and Department of Business Affairs and Consumer Protection (BACP) Commissioner Rosa Escareno on Tuesday announced the new rules, which go into effect May 22.
The aim, according to a statement from Mayor Lightfoot’s office, is to increase transparency and fair competition and “provide customers with the details they need to make fully informed purchasing decisions.”
The move comes as restaurants are pivoting to off-premises, including carry out, curbside and third-party delivery, to survive the pandemic.
Out in the Open
Most consumers are unaware of the fees paid by the restaurant. This fee, which is often built into the disclosed menu price of the food, can be about 30% of the menu price.
The new rules require that third-party delivery companies disclose itemized cost information, including any commission or service fee, menu price of the food, sales tax, delivery charge and tip, prior to the purchase of food as well as following the purchase via receipt. These new rules will be in place permanently and apply to all websites, mobile applications or other internet services that offer or arrange the sale of food or beverages by a restaurant, bar or other food-serving establishments. Violating the rules can result in a daily fine of $500 to $10,000.
“It is more important now than ever to support local businesses, and these new rules gives customers a crystal-clear picture of where their money is going when they use a delivery app,” said Tom Tunney, 44th Ward Alderman, in a statement. “This much-needed transparency will help customers understand where their money is going while supporting innovation within the restaurant and delivery industry.”
Delivery Under Fire
Third-party delivery services are under fire. A proposed class-action lawsuit was filed in federal court on April 13 alleging third-party delivery services including DoorDash, Grubhub, Postmates and UberEats, are using "unlawful" tactics. Cities too are taking notice of the fees as more consumers are relying on delivery during the COVID-19 pandemic and restaurants, with dining rooms closed across the country, are struggling to survive. In San Francisco the mayor made an emergency order that temporarily limits the fee that delivery companies can charge to 15% and will be in effect until restaurants are allowed to resume in-restaurant dining.
Seattle too has capped fees at 15% and is requiring 100% of tips to be paid to the driver, reported Eater.
In New York, a 20% cap on third-party delivery fees during the pandemic was approved by the city council on May 13.