Food Delivery Apps Dodged the Last Junk Fee Rule. What Now?

However, consumer advocacy groups and individual shoppers disagree. They argue that the current system is misleading and takes advantage of consumers’ hunger and convenience. Many consumers have shared stories of adding items to their cart, only to be shocked by the final price at checkout. Some have even reported feeling pressured to complete the purchase because they were already invested in the process.

One shopper, who wished to remain anonymous, shared their experience with a food delivery app: “I added a few items to my cart and didn’t think much of it until I saw the total cost. It was almost double what I expected, and I felt like I had no choice but to pay it because I was already hungry and didn’t want to start over.”

Advocates for transparent pricing argue that requiring food delivery apps to display all fees upfront would empower consumers to make informed decisions and avoid surprises at checkout. They believe that displaying the total cost, including all mandatory fees and charges, prominently throughout the shopping process would level the playing field and prevent deceptive practices.

As the FTC reviews the public comments and feedback, the future of food and grocery delivery fees remains uncertain. Will the government implement a rule requiring all-in pricing for these apps? Only time will tell.

In the meantime, consumers are encouraged to carefully review the total cost of their orders before completing their purchases. By being aware of potential fees and charges, shoppers can make more informed decisions and avoid unexpected costs.

Whether or not the government ultimately bans food delivery fees, the conversation around transparency and consumer protection in the digital marketplace is an important one. As technology continues to evolve and shape our daily lives, it is crucial that regulations keep pace to ensure a fair and honest marketplace for all.

TechNet, an organization representing tech CEOs, recently expressed concerns about the Federal Trade Commission’s (FTC) proposal to require all-in pricing for third-party food delivery services. The organization argued that all-in pricing would blur the line between menu prices and fees for services, which should be considered separately.

To illustrate their point, TechNet provided a hypothetical scenario involving a low-priced item: a bunch of bananas. In this example, the bananas are priced at $2, with a $4.99 delivery fee. Under all-in pricing, the app would display a $6.99 price for the bananas, potentially causing unnecessary sticker shock for consumers.

Furthermore, TechNet highlighted the differences in how food delivery fees are calculated compared to other types of fees. While food delivery fees are often based on factors such as distance and delivery speed, ticket fees are more standardized.

The organization emphasized that as customers add or remove items from their order, the displayed item price would fluctuate due to changes in the per-item share of the delivery fee. This dynamic pricing model is distinct from fixed pricing structures often seen in other industries, such as concert tickets.

Consumer advocates, however, argue that the issue is not as complex as industry groups make it out to be. Some states, like California and Minnesota, have already implemented regulations to address junk fees in the context of third-party food delivery.

California Attorney General Rob Bonta voiced support for federal rulemaking to address unfair food delivery fees. While California law requires food delivery platforms to display the full, all-in price of the delivery service, companies like Uber Eats, DoorDash, and Grubhub have interpreted this requirement differently. They currently only show required fees, such as service charges, leading to potential additional charges that inflate order totals.

For example, a medium Jamba Juice smoothie listed on a delivery app menu for $14 to $16 can end up costing $25.19 on the final checkout page, including delivery fees, “other fees,” tax, and a default tip. Grubhub CEO Howard Migdal, in a last-minute comment, suggested a possible path forward for FTC regulation, diverging slightly from the stance of the Flex Association.

Grubhub, which was fined $25 million in 2014 for junk fee violations, has since worked with the FTC on fee-display reforms. Migdal argued that Grubhub’s fees are more transparent than those of its competitors, emphasizing the importance of clear and upfront pricing for consumers. The Federal Trade Commission (FTC) is currently considering new rules for third-party food delivery platforms, following a proposal by Migdal that suggested extending the requirements imposed on Grubhub to its competitors. The proposal aims to ensure that all market participants in the food delivery space adhere to consistent, fair, and known criteria.

One of the key issues raised during the comment period was the lack of transparency when it comes to pricing on these platforms. The National Grocers Association and the Independent Restaurant Coalition both expressed concerns about hidden fees and markups that are often passed on to consumers. They argued that consumers should be informed about the reasons behind these higher prices, such as delivery app commissions, to avoid placing blame on merchants for factors outside of their control.

Uber, on the other hand, attempted to distance itself from responsibility for markups from in-store pricing. The company claimed that merchants have the discretion to set higher prices on the app than in-store and that it does not have real-time visibility into all in-store pricing information. However, the Independent Restaurant Coalition disputed this claim, highlighting the significant impact that delivery app commissions have on independent restaurants’ profit margins.

The National Retail Federation and the International Franchise Association, representing major retailers and fast-food chains, respectively, raised concerns about the potential impact of new rules on their in-house delivery services. They argued against applying the rules to them, claiming that it could restrict practices that do not deceive or harm consumers and stifle delivery innovations that consumers value.

Overall, the debate surrounding new rules for third-party food delivery platforms is complex and involves a wide range of stakeholders with competing interests. The FTC will need to carefully consider the feedback provided during the comment period to strike a balance between protecting consumers and ensuring a level playing field for all market participants.