Food delivery apps will face a permanent cap on the commissions they can charge restaurants under a bill passed by the New York City Council late Thursday, sending the shares of Grubhub and DoorDash plummeting.
The bill would limit the amount that apps can charge restaurants to 15 percent of food orders for delivery services, 5 percent for advertising and other miscellaneous services and 3 percent for credit card processing fees.
If signed into law, the New York City council bill would also require food delivery apps to apply for operating licenses, which would be reviewed every two years.
Shares of Grubhub’s parent company Just Eat Takeaway were down about 5.6 percent on the news mid-morning Friday, while DoorDash shares had fallen 2.4 percent, according to MarketWatch data.
Shares of Uber, which has a more diversified business and may therefore be less exposed to the bill, were up about 1 percent.
Mayor Bill de Blasio has 30 days to sign the legislation, which would take effect 120 days after becoming law. His office did not immediately reply to a request for comment.
The bill would make permanent a temporary cap that was first implemented in June 2020 in order to help restaurants weather the pandemic after many restaurants complained apps were charging fees as high as 30 percent.
In statements to Reuters, Grubhub slammed the bill as “flagrantly unconstitutional,” while DoorDash called it “unnecessary and unconstitutional.”
Uber spokesperson Harry Hartfield declined to comment.
The New York legislation follows a similar permanent cap on delivery fees passed by San Francisco earlier this summer.
Grubhub has also taken flak from politicians and restaurant owners over a controversial phone delivery system that unfairly charged restaurant owners for orders that never took place.
The company finally ditched the controversial practice this Monday, more than two years after The Post first reported on the issue in 2019. New York City Council members had been demanding that Grubhub refund all “erroneous phone order charges” to restaurants and threatened to “explore legislative solutions if the company fails to act.”