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Grubhub and Postmates Are Actively Defying Portland’s New Delivery Fee Law

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Grubhub also claims that it’s “a marketing engine” rather than a delivery app as a reason for continuing to charge higher fees to restaurants

Grubhub delivery bags hang on a bicycle

Three weeks after Portland City Council passed a new ordinance capping fees on food delivery apps at 10 percent, two companies — Postmates and Grubhub — are still flouting the rules, and taking fees of up to 30 percent from local restaurants.

In early July, City Council unanimously passed a fee cap to help small businesses struggling during the ongoing pandemic. Typically, when somebody orders delivery meals through an app like Grubhub or UberEats, the app takes a cut of the customer’s money, passing on the remainder to the restaurant — under the new cap, that “commission” can be no more than 10 percent of the value of a delivery order, or five percent for a pick-up order.

Katy Connors, an organizer with the Portland Independent Restaurant Alliance (PIRA), says that these companies may be taking advantage of the fact that city officials and lawyers are preoccupied with other issues, such as the unwanted presence of federal agents occupying the city.

“They know that cities and city councils don’t have the resources nor the ability to really understand what it means to enforce this.”

Eater PDX reached out to City Commissioner Chloe Eudaly for comment on the enforcement of the cap.

Last week, Portland Monthly reported that Grubhub and Postmates were violating the cap, but the bad press didn’t seem to change much: the day after that story was published, Han Hwang, owner of SE Division Street food cart Kim Jong Grillin’, received a message from a Postmates representative indicating that the company was actively not complying with the new law.

“We are not following the 10% [cap],” it read.

A subsequent email exchange between Hwang and another Postmates staffer said that the San Francisco-based company was working with the city “to understand the details of this new policy,” and that they “did not have a timeline as to when this cap will go into place”.

That email was sent July 29 — the cap took effect on July 8. Postmates has not yet responded to a request for comment.

Hwang told Eater PDX that as the owner of a small food cart, it’s not feasible for him to ditch apps like Postmates and hire his own delivery driver. Plus, with many customers preferring to stay home due to the ongoing pandemic, he says he has little choice but to sign up for apps and play by their rules to keep his business afloat.

“They’re fucking us, the restaurants, and then that forces us to fuck the customers...I can’t begin to explain how trapped and cornered we feel because we have to deal with them,” he said.

Connors says Postmates told her that it planned to follow the cap, and that it was working on implementing the fee change in its app — even though some other cities where Postmates operates have already put in similar caps.

“San Francisco was one of the first to implement a cap in April — we’re almost in August and they haven’t figured it out yet? I’m not sure that’s a legitimate reason.”

In an email to Hwang, Postmates also flagged the possibility of retroactively refunding fees taken from his restaurant, if the cap was eventually applied.

Considering these factors, Connors says she believes Grubhub poses bigger problems than Postmates.

In an email to Connors, Grubhub’s senior director of public affairs Amy Healy claimed that the company was already adhering to the 10 percent cap on fees. The company claimed that any additional costs were “marketing fees,” not “delivery fees”, and therefore weren’t covered under the cap.

“Unlike our competitors, who are focused on providing restaurants with delivery services, Grubhub is primarily a marketing engine for our independent restaurant partners,” Healy wrote as part of her explanation.

But this distinction is irrelevant, says Connors. Portland’s law is clear that apps can’t take fees totalling more than 10 percent of an order from a restaurant, regardless of whether the fee is for delivery, marketing, or any other service.

The receipts Grubhub issues to restaurants often contain three charges: a processing fee, a commision for delivery, and another for marketing.

Healy’s email went on to claim that these marketing fees were on an opt-in, although Connors says that after reading the fine print, she did not believe this to be the case. A statement from Grubhub to Eater reiterated this line of reasoning, too.

The Portland ordinance applies to “order and delivery” services and does not place any cap on marketing services that Portland restaurants choose to pay that are unrelated to our order and delivery services. While we have taken steps to comply, we continue to maintain that such fee caps are legally suspect and harm the very restaurants they are intended to help.

As many as 30 restaurants contacted Connors and PIRA with complaints relating to the delivery cap — in the meantime, Connors says she recommends that Portlanders avoid using that app.

“If Grubhub cannot comply and is unwilling to understand the plight of these small businesses, then we do not want them in our city.”