L.A. moves to extend food delivery fee cap, penalize companies that don’t comply

Los Angeles officials have moved forward with plans to extend an emergency ordinance limiting fees that third-party delivery services such as Postmates, Grubhub and UberEats are allowed to charge restaurants during the COVID-19 crisis.

The ordinance, which was approved by the City Council on May 20 and caps delivery fees at 15% of the order price and all other fees at 5%, was designed to end 90 days after L.A. lifted its ban on-premise dining, which meant the cap would expire next week on Aug. 31.

However, the City Council voted 14-0 Wednesday to ask city attorneys to draft an extension of the law that would keep the delivery fee caps in place until 90 days after restaurants are allowed to operate at 100% capacity with no restrictions, as well as create an enforcement plan that would penalize delivery services that overcharged restaurants.

“Our emergency order has helped level the playing field [for restaurants], and this needs to continue,” Councilman Mitch O’Farrell said.

O’Farrell pointed to a report released earlier this month by chief legislative analyst Sharon Tso, which found that nearly 95% of restaurants surveyed would like the ordinance to continue, with 72% saying the cap had been beneficial during the COVID-19 pandemic.

The survey also found that a majority of third-party food delivery companies are currently failing or refusing to comply with the ordinance, with more than two-thirds of restaurants reported being overcharged the 15% delivery fee, while just over half reported being overcharged the 5% non-delivery fee.

“Keep in mind that state Penal Code Section 396 addresses price gouging during local, state and federal emergencies. It’s a crime,” O’Farrell said. “Violations can result in criminal prosecution.”

Among other large cities that have passed similar measures, some such as Seattle and San Francisco have already extended delivery fee caps until all dine-in restrictions are lifted. Officials in New York City have discussed extending that city’s delivery fee cap, slated to expire in September, until 2021.