The city has instituted one of the most stringent caps on delivery app commissions.

By Mike Pomranz
July 16, 2020
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Due to the COVID-19 pandemic, the already popular restaurant delivery business has become even more important. But an unsettling question underpins the entire industry: Are these services really worth it for anyone involved? Restaurants regularly complain that profit margins are being squeezed by massive fees, but at the same time, as a Wall Street Journal report explained in May, the delivery companies themselves are struggling to profit even while sales are increasing.

On the former front, many cities have been passing legislation capping these fees to protect local restaurants. And while you may have little sympathy for a $55 billion behemoth like Uber, basic math means that protecting the profits of restaurants means less money for the delivery companies—further exacerbating their profit issues. So in Portland, Oregon, where, last week, the city passed a 10 percent cap on fees during the coronavirus pandemic, Uber Eats has moved to a new solution: an across-the-board $3 “City of Portland Ordinance” customer service charge.

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In the app, the new fee—which is listed along with the usual stuff like the service fee, delivery fee, tip, and taxes—is described as a new charge intended “to help keep delivery drivers on the road” while the city “temporarily limits what Uber Eats charges restaurants to fulfill orders.”

“This was a tough decision, and we know it will impact customers and restaurants,” Uber spokesperson Harry Hartfield told Oregon Live. “The fee will only apply to Portland restaurants, so customers in Portland can still order from surrounding areas to avoid the additional cost.”

Reached by phone, Hartfield stressed to me that Portland’s 10-percent cap is the strictest in the country—with other cities typically capping fees at 15 percent or higher—and Uber Eats simply couldn’t afford to pay their drivers without this fee. “The fee goes entirely to the drivers,” he told me. Also worth noting, Oregon Live explains that the city’s ordinance makes it illegal for delivery services to make up for lost revenue by lowering pay to drivers.

Furthermore, how long the fee will last—or whether this is a growing trend—isn’t cut and dry. For instance, Portland’s 10-percent cap is apparently set to lift 90 days after the city ends its COVID-19 state of emergency order. That date is TBD, but it does mean that, for now, the strict cap is only temporary. Meanwhile, back in May, when Jersey City put a 10-percent cap on fees, Uber Eats applied a similar $3 fee there; when a new statewide law raised the cap to 20 percent, Uber Eats removed the Jersey City fee, according to NJ.com. So on both sides, we’ve seen at least some precedent that middle ground can be reached.

But for now, Portland is currently the only city where Uber charges this type of fee. As to whether we’ll see similar fees elsewhere, that would seem to depend on at what percentage other cities choose to cap delivery fees.