New York City has placed limits on the amount that food delivery apps can charge restaurants that use their platforms.
The proposal, which was put to a vote on Wednesday, will cap the fee at 20% and will apply in emergency situations where restaurants must be closed.
There have been complaints about fees charged by tech companies amid skyrocketing deliveries during the lockout.
Other US cities like San Francisco, Washington and Seattle have also introduced stricter rules for applications.
Grubhub, the owner of Seamless online food ordering service and the largest player in the U.S. market, warned that the city cap would increase costs for customers and reduce opportunities for workers.
The cabinet said the law was “an overshoot” on the part of local authorities and would not stand up to a court challenge.
“Any arbitrary cap – no matter how long – will reduce the volume of orders at local restaurants, increase costs for small business owners and increase costs for consumers,” said Grubhub.
“The delivery men would have fewer work opportunities and lower incomes. “
The New York City Council had begun to discuss ways to limit the fees charged by mobile applications before the pandemic.
But the restaurant crisis triggered by the orders has injected new urgency into the effort, as many restaurants have found themselves dependent on food delivery apps like Grubhub, Doordash and UberEats for businesses.
Businesses currently charge restaurants for a range of up to 30% per order, with fees for services, including marketing, taking customer orders, and delivery. These costs can be punishing in an industry where profit margins generally hover around 10%.
George Constantinou, who runs restaurants in New York and New Jersey, told the BBC in April that he was trying to negotiate lower rates for his business, calling the commissions unsustainable.
“When you have a full dining room and you already pay to have your cooks and staff there, it is one thing, but when you do not have this dining room, it hurts you”, a- he declared.
Last month, three restaurants filed a class action in New York City, accusing Grubhub, Doordash, Postmates and Uber Eats of exercising a monopoly power that resulted in exorbitant fees and restrictions on restaurants.
Reports this week that Uber and Grubhub are planning to merge have only heightened these concerns.
‘Level the playing field’
While delivery apps have announced their own relief to restaurants since the pandemic, taking steps to lift, reduce or defer some of the fees, restaurant owners and their lawyers say the businesses have not gone far enough.
Before the vote on Tuesday, New York mayor Bill de Blasio said he supported cost cap plans, calling it “smart legislation.”
Legislative Councilor Mark Gjonaj said he hoped the boundaries would provide relief.
“Proud to fight for a bill that will level the playing field and help restaurants get through this crisis, while restaurant owners are being held hostage by third-party delivery apps that monopolize search results,” said he writes on Twitter.
Andrew Rigie, executive director of the NYC Hospitality Alliance, called the measure “a critical first step.”
“We are looking forward to working with legislators to implement these protections permanently,” he said.