AB 286 Would Limit Food Delivery Fees to 15 Percent of the Purchase Price

On March 22, Assembly Members Lorena Gonzalez (D-San Diego) and Alex Lee (D-San Jose) amended their Assembly Bill 286 to limit charges by food delivery platforms.  The bill would amend Section 22598 and add Sections 22599.1, 22599.5, and 22599.6 to, the Business and Professions Code.

Section One of the bill would provide nine legislative findings and declarations including that the pandemic has had a drastic impact on local economies, with shutdowns heavily impacting the restaurant industry. As a result, a significant number of restaurants have turned to third-party food delivery companies that provide delivery services to supplant the loss of indoor and outdoor dining opportunities. However, to provide these services, third-party food delivery companies charge restaurants and customers various sets of commissions and fees for the act of delivering the food.

According to the legislative findings, there is an imbalance in negotiating power with smaller restaurants have little to no ability to negotiate lower fees, with many restaurants regularly paying in excess of 30 percent of the purchase price in commissions, fees, and service charges.

In addition, many local jurisdictions in California have instituted ordinances that cap the commissions, fees, and service charges that third-party food delivery companies can charge. Finally, there should be a statewide policy that is consistent across jurisdictions in order to provide relief to small restaurants and other food facilities.

Section Two of the bill would amend Business and Professions Code Section 22598 to provide definitions of “online order” and “purchase price.” Existing law already provides definitions of “food delivery platform” and “food facility.”

Section Three of the bill would add Business and Professions Code Section 22599.1 to make it unlawful for a food delivery platform to do any of the following:

• Charge a food facility any combination of fees, commissions, or costs for a food facility’s use of a food delivery platform’s service that totals more than 15 percent of the purchase price of each online order.
• Charge a food facility any amount designated as a delivery fee for an online order that does not involve the delivery of food or beverages.
• Charge a food facility any fee, commission, or cost other than as permitted in paragraph (1) or (2).
• Charge a customer any purchase price for food or beverage that is higher than the price set by the food facility.
• Retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by a food delivery platform, in its entirety, to the person delivering the food or beverage.

In addition, the bill would require a food delivery platform to disclose to the customer and to the food facility an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to, the following information:

• The purchase price of the food and beverage.
• The delivery fee charged to the food facility.
• Each fee, commission, or cost charged to the food facility.
• Each fee, commission, or cost charged to the customer by the food delivery platform.
• Any tip or gratuity that will be paid to the person delivering the order.

Section Four of the bill would add Business and Professions Code Section 22599.5 to specify that a violation of this area of law constitutes unfair competition, which means a private right of action could be instituted to enforce the law pursuant to Section 17200, the Unfair Competition Law, of the Business and Professions Code.

Section Five of the bill would add Business and Professions Code Section 22599.6 to provide a severability clause. The bill is expected to be heard in its first policy committee in April.