Power

Delivery companies are fighting city commission caps. Does anybody win?

Uber tacked on fees and Postmates organized petitions to push back against delivery fee limits.

A Grubhub delivery rider

Caps have been introduced by cities in an attempt to protect a restaurant industry being price-gouged at a time when delivery is really the only option for making sales.

Photo: Bloomberg via Getty Images

On May 7, Jersey City capped delivery app fees charged to restarurants at 10%, instead of the typical 15% to 30% many such platforms take. The next day, Uber Eats added a $3 delivery fee to local orders for customers and reduced the delivery radius of Jersey City's restaurants.

Now, fewer people are ordering from the restaurants via Uber Eats and instead are shifting to other platforms, the company and the town's mayor both confirmed to Protocol.

That example illustrates a core argument that food delivery companies like Uber, Grubhub, Postmates and DoorDash are all increasingly using to fight back against such caps, introduced by cities to protect a restaurant industry being price-gouged at a time when delivery is really the only option for making sales. Limits on commissions like the one imposed by Jersey City, delivery companies argue, will likely result in higher fees being passed along to the consumer, which could in turn generate lower demand for the restaurants and less work for gig economy drivers, a job laid off employees are turning to.

The real pain could come if other delivery companies feel they have little choice but to follow Uber Eats. "The bottom line is it's just going to hurt everybody," said Postmates board member and Spark Capital investor Nabeel Hyatt.

Jersey City is not alone in introducing a cap. San Francisco first introduced such a cap via an emergency executive order, and it has sparked a chain reaction throughout North America as cities including Seattle, New York and Washington, D.C., have passed similar limits. Chicago, Los Angeles and Boston are also reported to be considering a crackdown.

Inside the delivery companies, the sudden rash of executive orders has sent policy teams scrambling to defend their positions. Rather than a normal legislative process, most of these caps have come through emergency orders, and any negotiating or lobbying is having to take place over Zoom and far faster than usual — or often after the fact.

And in Uber's case, it's not just lobbying. In San Francisco, it cut off delivery to a neighborhood. In Jersey City, it's fighting back with surcharges.

"We support efforts to help the hospitality industry, which is why we've focused the majority of our efforts on driving demand to independent local restaurants, which we know is a key concern of our partners during these unprecedented times," an Uber spokesperson said. "Regulating the commissions that fund our marketplace — particularly during these unprecedented times — would force us to radically alter the way we do business, set a far-reaching precedent in a highly competitive market, and could ultimately hurt those that we're trying to help the most: customers, small businesses and delivery people."

Jersey City Mayor Steven Fulop told Protocol that he was "not surprised that Uber responded by putting a surcharge" on deliveries. "Uber's entire culture of a company is based on taking advantage of working families, taking advantage of their drivers, exploiting their workers and then discarding them with layoffs like trash as soon as the waters get a little rocky," he said.

He had, after all, gone through a similar ordeal last year with Airbnb, which pushed back after the city imposed stricter regulations on the short-term rental company. Despite Airbnb spending millions, residents still voted in favor of stricter regulations, a victory for Fulop and Jersey City over the tech industry. "I share that with you because we have no intentions of backing down from the policy put in place here, either," Fulop said.

When it came to this executive order, he said the city focused first and foremost on talking with restaurants and then looked at the West Coast cities that had passed their own orders to determine a reasonable action. The city's interaction with the tech companies beforehand was admittedly limited, but Fulop did email Uber after it instituted its fee and reached out to customers.

"Our priority wasn't to figure what works for Uber Eats," he said. "Our priority was to figure out what works for the restaurant industry. That's our focus. We're not going to try and negotiate with the company that's trying to exploit our restaurants."

That leaves other delivery companies fighting a rearguard action, trying to find a middle ground before they're also forced to take similar steps.

Grubhub's CEO Matt Maloney already said in the company's earnings call on May 7 that the company had seen a 10% decrease in orders to local restaurants in San Francisco as a result of the commission cap and subsequently raised fees. "That is not good for small businesses and even worse, these lost orders also result in lost wages and tips for our delivery drivers," Maloney said at the time. The company has continued to push back against other cities through its policy team. In a letter sent Monday to Chicago politicians, Grubhub head of policy Amy Healy wrote that the caps result in "damaging, unintended consequences" for businesses, customers and delivery drivers. "And we believe that any cap on fees represents an overstep by local officials and will not withstand a legal challenge," she added.

So far, DoorDash and Postmates have not raised fees, but are leaving the option on the table.

At the core of DoorDash's lobbying arguments are the unintended side effects of artificially limiting one side of the marketplace. While the caps do help restaurant margins, they also mean less money for the delivery platforms, which still have to pay delivery drivers. All of the platforms make money through a combination of customer service fees and restaurant commissions, so when the commission fees are capped, companies like DoorDash are forced to evaluate how they will recoup the difference, either through more consumer fees or cutting driver pay or both. Already, DoorDash had cut some of its commissions as a measure to help local restaurants that were signing up during the crisis.

"DoorDash's top priorities are the physical and economic health of our community, and we're disappointed that, in the midst of this crisis and when food delivery is more essential than ever, we've seen arbitrary caps imposed that can have the unintended consequence of reducing sales for restaurants when they in fact need them most," a DoorDash spokesperson said. The company, which has tried to engage with Jersey City's council, said that it is "looking forward to working with Mayor Fulop and other elected officials" so it can continue to offer affordable delivery services.

Postmates, on the other hand, is advocating that cities institute a per-order fee or percentage instead of a rate cap, and put the money toward a longer-term restaurant relief fund — a surcharge that it estimates could generate $7 million to $10 million a month for restaurants in Los Angeles alone. In anticipation of an upcoming vote on Wednesday in Los Angeles, where Postmates is the dominant delivery service, the company created a widget so that its driver fleet could easily send letters to the city council; nearly 17,000 letters have been submitted in the last two weeks, the company said. Postmates also helped facilitate a petition from more than 20 restaurants that, in a rare move, wrote in to oppose the delivery caps. (Overall, many restaurants have been supportive of the efforts to cap delivery commissions, a position that garnered public support after a Grubhub receipt went viral.)

"The blunt force of rate setting pits on-demand delivery apps and our local brick-and-mortar business partners with the unintended consequences of increasing customer costs, reducing restaurant orders and services, harming worker pay, thus shrinking city tax revenues," a Postmates spokesperson said. "As a durable, longer-term alternative, Postmates has been working with lawmakers, community leaders, restaurants and public unions to explore a 'restaurant resiliency fund,' which would enable local restaurants to keep their lights on, cover commercial rents, and ensure workers continue to be paid with a per-transaction surcharge that would raise $7 million to $10 million month over month for restaurants and workers in cities like LA."

So far, commission caps across the country are temporary, but there's also concern that they could become permanent, particularly if the proposed Uber Eats and Grubhub merger goes through — especially considering that the merger has already caught the attention of lawmakers. "We believe it is unlikely that these fees caps are eliminated anytime soon, and especially if both companies merge," BTIG analyst Peter Saleh wrote in a note to clients last week.

Meanwhile, in Jersey City, Fulop is satisfied with the outcome so far. Orders on Uber Eats have gone down, he said, but for now customers have switched to other delivery platforms that aren't yet adding a surcharge. Anecdotally, one restaurant he spoke to is seeing the same amount of volume as before just with better margins, which is exactly what Fulop wanted for his restaurant businesses.

And when in doubt, he's still advising constituents to take a low-tech approach to helping local restaurants: Order from the restaurants directly, and bypass the delivery companies altogether.

Workplace

Ask a tech worker: How many of your colleagues have caught omicron?

Millions of workers called in sick in recent weeks. How is tech handling it?

A record number of Americans called in sick with COVID-19 in recent weeks. Even with high vaccination rates, tech companies aren’t immune.

Illustration: Christopher T. Fong/Protocol

Welcome back to Ask a Tech Worker! For this recurring feature, I’ve been roaming downtown San Francisco at lunchtime to ask tech employees about how the workplace is changing. This week, I caught up with tech workers about what their companies are doing to avoid omicron outbreaks, and whether many of their colleagues had been out sick lately. Got an idea for a future topic? Email me.

Omicron stops for no one, it seems. Between Dec. 29 and Jan. 10, 8.8 million Americans missed work to either recover from COVID-19 or care for someone who was recovering, according to the Census Bureau. That number crushed the previous record of 6.6 million from last January, and tripled the numbers from early last month.

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.

COVID-19 accelerated what many CEOs and CTOs have struggled to do for the past decade: It forced organizations to be agile and adjust quickly to change. For all the talk about digital transformation over the past decade, when push came to shove, many organizations realized they had made far less progress than they thought.

Now with the genie of rapid change out of the bottle, we will never go back to accepting slow and steady progress from our organizations. To survive and thrive in times of disruption, you need to build a resilient, adaptable business with systems and processes that will keep you nimble for years to come. An essential part of business agility is responding to change by quickly developing new applications and adapting old ones. IT faces an unprecedented demand for new applications. According to IDC, by 2023, more than 500 million digital applications and services will be developed and deployed — the same number of apps that were developed in the last 40 years.[1]

Keep Reading Show less
Denise Broady, CMO, Appian
Denise oversees the Marketing and Communications organization where she is responsible for accelerating the marketing strategy and brand recognition across the globe. Denise has over 24+ years of experience as a change agent scaling businesses from startups, turnarounds and complex software companies. Prior to Appian, Denise worked at SAP, WorkForce Software, TopTier and Clarkston Group. She is also a two-time published author of “GRC for Dummies” and “Driven to Perform.” Denise holds a double degree in marketing and production and operations from Virginia Tech.

The fast-growing paychecks of Big Tech’s biggest names

Tech giants had a huge pandemic, and their execs are getting paid.

TIm Cook received $82 million in stock awards on top of his $3 million salary as Apple's CEO.

Photo: Mario Tama/Getty Images

Tech leaders are making more than ever.

As tech giants thrive amid the pandemic, companies like Meta, Alphabet and Microsoft have continued to pay their leaders accordingly: Big Tech CEO pay is higher than ever. In the coming months, we’ll begin seeing a lot of companies release their executive compensation from the past year as fiscal 2022 begins.

Keep Reading Show less
Nat Rubio-Licht
Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.
Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs WordPress.com, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool Parse.ly and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Hybrid work has some distinct advantages when it comes to onboarding.

Photo: LogMeIn

Jo Deal is the chief human resources officer at LogMeIn. She is responsible for leading global people strategy with a focus on attracting, developing and engaging talent.

The desire for change that sprung up during the pandemic resulted in the highest attrition levels in decades and a fierce war for talent playing out in the market. The Great Resignation forced managers to suddenly make hiring their top priority, and recruitment partners became everyone’s best friend as leaders scrambled to replace key roles within their teams.

Keep Reading Show less
Jo Deal
Jo Deal serves as LogMeIn’s Chief Human Resources Officer. She is responsible for leading global people strategy with a focus on attracting, developing and engaging world class talent by expanding LogMeIn’s reputation as one of tech’s most desirable career destinations, and by providing a collaborative learning environment where employees can grow their careers.
Entertainment

Peloton’s terrible, horrible, no good, very bad year

2022 just started, and Peloton has already halted bike production and is talking about mass layoffs. How did the pandemic darling get here?

How did Peloton go from pandemic star to sinking ship? One answer is the classic problem of supply and demand.

Image: Peloton; Protocol

It’s been a hell of a ride for Peloton. The headlines have been practically nonstop, from 2019’s cringey wife ad to 2021’s series of unfortunate “Sex and The City” events. But in 2020, Peloton could do no wrong. The at-home fitness company saw a 172% spike in sales over the course of that year, buoyed by the pandemic forcing wealthy gym-goers to stay home.

But nothing is ever easy or certain when it comes to Peloton. In the past week, Business Insider reported that Peloton is considering laying off 41% of its sales and marketing staff and closing down stores. CNBC learned that the company has hired McKinsey & Co. to help cut costs. And yesterday, CNBC reported that Peloton is temporarily halting production of its bikes. Peloton shares promptly plunged 24%.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Latest Stories
Bulletins