Food delivery app orders have more than doubled since COVID-19 began to spread in the US earlier this year. Accompanying this surge was a rise in fees related to service, delivery, and restaurant commissions.
Food delivery app companies have been employing design practices that obfuscate fees — impacting restaurant profits and worker pay. “These outsized fees are massively eating into what little profit restaurants are able to realize today,” testified Jess Lappin, President of the Alliance for Downtown New York in support of a bill that would prohibit third-party delivery services from charging more than 15% charged to restaurants and “more than a 5% fee per order for all other types of charges.” “Charging a 30% fee, especially during an unprecedented crisis, is unconscionable.” Recently in August, DC Attorney General Karl Racine sued Instacart for deceptive consumer service fees and said they misled consumers about how service fees contributed to worker pay.
Transparency is helpful to empower users to make clear decisions about what their money is going toward and how it’s impacting their local economy and the contract delivery people who lack full-time worker protections and benefits. It is one of many mechanisms in an ecosystem of change we need to further hold companies accountable to the many stakeholders who rely on their services. At a minimum, consumers deserve to know what they’re paying for — be it a service fee, a tip, or a meal — and who they’re paying for it — so that they can make informed choices about whether and how to utilize these services, with an understanding of how these services can affect their local community. Consumers deserve more transparency into how these businesses operate to hold themselves accountable as consumers, to hold the companies accountable for their practices, and to hold their representatives accountable for the effectiveness of their policies
Consumer Reports strongly recognizes that fee transparency is only a portion of a larger ecosystem of challenges including but not limited to fair worker and contractor rights, adverse impacts to marginalized communities during COVID, and the rise of monopoly power and antitrust violations in this industry. However, fee transparency is a lens into how companies can be better held accountable to the contractors, consumers, and restaurant owners who rely on these platforms.
To further explore these issues of fee transparency, Consumer Reports investigated four food delivery companies with the highest share of US consumer spending — DoorDash, Grubhub, Postmates, and UberEats earlier this year. We also focused our research on seven cities: Chicago, Jersey City, Los Angeles, New York City, Portland, Seattle, and Washington DC. All of these cities responded to protect consumers and small businesses by enacting unique local rules or ordinances. To measure compliance with these new rules, we ordered the same meal in seven cities and compared the pre-purchase fees of four food delivery app companies.
Our team focused on Chicago’s recent rule on Third-Party Food Delivery Services as opposed to other cities as it highlighted user interface fee elements we could test and validate within our scope of research. We examined two key points from the rule: It mandates disclosure and itemization of fees and other charges across receipts before purchase and it mandates disclosure of commission fees that go to the restaurants. In Chicago, we compared the company receipts both before and after purchasing a meal for delivery.
We outline two main takeaways from this research:
- Our research highlights how these companies have apparently continued to not comply with the new Chicago rule:
Commission fee disclosure. In Chicago, Grubhub and Postmates do not disclose the commission paid by restaurants, in apparent violation of Chicago’s rule. DoorDash’s and UberEats’s disclosures that commissions range “up to” 15% or 30% are vague and also potentially noncompliant.
Plain, simple, and conspicuous disclosure: The Chicago rule requires that “the third-party food delivery service shall disclose to the customer, in plain and simple language and in a conspicuous manner.” With DoorDash, Grubhub, and Postmates, fee line items like “service fees and taxes” are bundled together with an inconspicuous user interface (UI) element where users have to click “information icons” to see more.
- All companies can do better to improve fee transparency and increase company accountability by avoiding dark design patterns. We highlight more detailed takeaways in the findings section. The full report is available here.
In the course of our investigation, we contacted the City of Chicago’s Business Affairs and Consumer Protections (BACP) Office who created the Third-Party Food Delivery Services rule. We learned from BACP that Grubhub and Postmates along with ChowNow, EatStreet and ezCater have received citations in June for allegedly breaching the rule’s requirement on fee itemization and commission transparency.
The Chicago’s BACP Office told us, “During that initial enforcement, citations were issued to five companies [previously mentioned] that had not taken any steps to comply [ChowNow, EatStreet, ezCater, Grubhub, Postmates]. Since that round of enforcement, we have been working closely with the companies to evaluate their compliance. At this point, Doordash and Beyond Menu have proven to BACP that they are substantially compliant. Other companies, including Grubhub, Postmates and Uber Eats, have taken steps to comply with some portions, however, we are presently in discussion as to whether they are fully compliant. We continue to work with all companies to bring about compliance, including the possibility of alternative means of disclosure that could be approved. At this point no alternative means have been approved.”
Consumers deserve to have informed choices to understand what they are being charged for and how their dollars spent impacts the restaurants they support in their communities.
“I did like that there was an option to donate extra funds to the restaurant,” Kaylynn S. from Dallas, Texas explained about her preference using food delivery apps. “I think that is very important for the pandemic we are having right now.”
The choice to “shop local” is one that can support the continued existence of local businesses during an economic downturn. Companies providing these services must be held accountable by increasing transparency to small, local businesses and to consumers who frequent them. They must design itemized fees that are accessible and clear to users and not bundled in subtle user interface elements. They must also design patterns to enable clear disclosure of the exact commission fees to restaurants. As we have found in this research, offering percent ranges for restaurant commission (e.g. “up to 30%”) is not acceptable.
There is more work to be done, but let’s start with fixing company norms and practices around fee transparency. Finally, we want to continue this momentum. Consumer Reports would like to hear from consumers, delivery drivers, and restaurant workers’ experience with food delivery apps and how fees make their way to you. Click here to share your story.
For more details on this research, please view the full report here.