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The proposed legislation would cap delivery fees companies such as Uber Eats charge restaurants in areas where indoor dining is banned
The Ontario government is proposing a cap on food delivery fees as part of legislation to help restaurants in lockdown weather the pandemic.
On Thursday, Associate Minister of Small Business and Red Tape Reduction Prabmeet Sarkaria said the Supporting Local Restaurants Act would cap fees charged to restaurants by apps such as Uber Eats, SkipTheDishes and DoorDash in the parts of the province where indoor dining is prohibited.
Indoor and outdoor dining is not allowed in Toronto and Peel Region due to COVID-19 lockdown measures. Restaurants and other food establishments in those areas are now relying on takeout and delivery to stay afloat.
Some delivery apps charge restaurants up to 30 per cent commissions on takeout food orders.
Sarkaria, who introduced the bill on Thursday, tells NOW that new regulations will cap the fees at 15 pre cent for delivery fees and not more than 20 per cent with other fees, such as credit card fees.
Several municipalities in the United States implemented delivery commission caps during the first wave of lockdowns in the spring.
The Ontario legislation is modelled after similar measures passed by New York City council earlier this year, Sarkaria said.
The associate minister consulted with the foodservice sector, as well as apps DoorDash, Uber Eats and SkipTheDishes, in crafting the bill.
“These companies represent 87 per cent of the market in Ontario,” he says. “We are going to set up enforcement lines. If an establishment is not cooperating, they will be investigated and at some point could face very heavy fines.”
Sarkaria adds the three big apps have given “assurances” that they will not retaliate by reducing delivery radius, passing fees on to consumers in the form of increased prices or dropping restaurants from their platforms.
There have been press reports that Uber has retaliated to commission caps enacted in U.S. cities.
“The companies that we have spoken to currently are in line with the decision that we have made,” Sarkaria says. “During a pandemic, I’m certain these companies who have agreed to participate in this legislation will be capping their fees at 20 per cent and ensuring there are not adverse affects to consumers, delivery drivers or services.”
If passed, the legislation would mean a food delivery service could be fined up to $10 million for failing to comply with the cap. The the new rules also require delivery companies to ensure employees or contractors’ compensation are not affected by the changes.
The proposed bill includes mechanisms to allow restaurants and food delivery employees and contractors to file complaints if a company violates the rules.
Reaction from the delivery apps has been mixed or muted.
“We are disappointed that they have decided to regulate private enterprise by enforcing a commission cap on food delivery services operating in the province,” SkipTheDishes CEO Ken Edwards said in a statement.
Ask for comment on the proposed bill, an Uber Canada spokesperson said: “As we continue our work with restaurants, customers,and delivery people, we appreciate the opportunity to engage with the government on this issue.”
“We recognize the challenges restaurants are facing while indoor dining is prohibited, and the difficult decisions local leaders must make to stop the spread of COVID-19,” a DoorDash spokesperson said in a statement. “We are grateful for the opportunity to engage with the Premier, Associate Minister Sarkaria and their team on this issue.”
The NDP critic for Economic Growth and Job Creation Catherine Fife said the government should have acted sooner in the pandemic to cap fees and should extend the cap province-wide.
“The government’s proposals today only apply to regions where indoor dining is prohibited, leaving small businesses in the rest of the province who also rely on delivery services to stay afloat, without protection from these costly charges,” Fife said in a statement. “This limited measure alone is a step in the right direction, but more comprehensive supports need to be made available to small businesses.”
The proposed bill does not apply to chain restaurants.
The legislation would take effect in areas where the province or a local medical officer of health, acting under section 22 of the the Health Protection and Promotion Act, has ordered an indoor dining shutdown.
Toronto mayor John Tory applauded the move in a statement posted on Twitter.
In October, Toronto City Council passed a motion asking the province to temporarily cap the commission fees restaurants pay to food delivery apps. The motion did not spell out a limit.
Uber Eats Canada responded by reducing the “delivery-only” commission rate on orders restaurants process themselves via an Uber-owned ordering platform. The commission will drop from 15 per cent to 7.5 per cent across Canada until the end of the year.
The tech giant did not cut commissions on orders placed via its app.
SkipTheDishes gave restaurants in York, Peel and Toronto a 25 per cent cut on commission rates and waived commissions for 30 days on new-sign ups. Restaurants using their own staff to deliver paid 10 per cent commission.
This story has been updated to include comments from Minister Sarkaria and reps for the delivery apps.