[ The antitrust researcher Moe Tkacik discusses New York’s new
laws and the future of DoorDash, Grubhub, and Uber Eats.“It’s
conventional wisdom now that these companies are bloodsucking
middlemen,” says Tkacik.] [[link removed]]

PORTSIDE CULTURE

THE FIGHT TO REIN IN DELIVERY APPS  
[[link removed]]

 

Helen Rosner
October 5, 2021
New Yorker
[[link removed]]


*
[[link removed]]
*
[[link removed]]
*
* [[link removed]]

_ The antitrust researcher Moe Tkacik discusses New York’s new laws
and the future of DoorDash, Grubhub, and Uber Eats.“It’s
conventional wisdom now that these companies are bloodsucking
middlemen,” says Tkacik. _

,

 

Prior to the coronavirus pandemic, the business model of food-delivery
apps went largely unconsidered by the diners who relied on them for
midday kale salads and late-night taco feasts. Platforms such as Uber
Eats, DoorDash, and Grubhub often charged restaurants commissions of
up to thirty per cent per order, and they were evasive about how (and
how much) their couriers were compensated. But for most restaurants
delivery comprised only a fraction of total sales. Then the covid-19
pandemic turned virtually all restaurants into
takeout-and-delivery-only businesses, and the brutal economics of the
delivery apps became a matter of life-or-death urgency, for both the
restaurants selling food and the couriers delivering it.

In April of last year, San Francisco became the first city to enact an
emergency order to cap delivery-app fees for restaurants at fifteen
per cent. That prompted a cascade of similar legislation in other
cities and states, almost all of them covid-specific measures with
built-in expiration dates. This August, though, New York City became
the first city to make its fifteen-per- cent-delivery-fee cap
permanent, and last week the city passed an unprecedented package of
legislation specifically addressing working conditions for delivery
couriers. The “big three” delivery apps (formerly a big four;
Postmates was acquired by Uber in December, 2020), each of which is
valued at many billions of dollars, have frequently joined forces to
push back against such attempts at regulation, and have already filed
suit against New York City.

Moe Tkacik, a former journalist who now works on delivery-app
regulation, thinks that the apps may be fighting a losing battle. A
senior fellow at the antitrust think tank the American Economic
Liberties Project and the founder of the A.E.L.P.-funded Protect Our
Restaurants, Tkacik has been studying the impact of delivery apps
since early in the pandemic, when her husband, a chef, was struggling
to keep his restaurant afloat. I spoke with her recently about why
regulation has been so long in coming and whether a better
food-delivery model is possible. Our conversation has been edited for
length and clarity.

What put delivery apps on your radar?

In March of last year, I was working with the American Economic
Liberties Project and, meanwhile, trying to do whatever I could to
help my husband, who’s the chef at an Italian restaurant in D.C. I
was concerned that a lot of his workers would not qualify for
unemployment, so we were putting our heads together to figure out how
we were going to change his business model to be something capable of
generating revenue during the pandemic. Delivery was one of the first
things we thought of, and his general manager at the time said,
“Well, you know, the minimum [commission] is going to be thirty per
cent for all of the delivery apps.” The idea that they would be
extracting thirty per cent from every transaction was just unthinkable
to me. And I knew immediately: oh, that’s not cool. It’s
unsustainable for anybody, and it’s going to kill restaurants. They
couldn’t have arrived at that number in a good-faith way. And
indeed, as I began to probe the history of the delivery-app sector,
the thirty-per-cent commission really only shows up when Uber Eats
entered the market. And when they enter a market, suddenly DoorDash
and Grubhub are raising their commissions, too. We actually have
e-mails that certain restaurants have gotten that say, “As you are
aware, the market rate for online/mobile delivery ordering is now
thirty per cent,” and in accordance with that, we will be raising
your fees.

That’s not how competition is supposed to work, right? We’re
taught that if there’s more competition, it drives costs down and
quality up. And what you’re describing sounds like the opposite.

In the world of Silicon Valley finance, you have people who all know
one another, you have [companies with] similar investors. Take
DoorDash and Uber Eats: in early 2020, SoftBank—which is a major
investor in both of them—was trying to arrange a merger of those two
companies. In a lot of cases, you don’t actually have any legitimate
competition, because you’re creating de-facto collusion. When there
are so few competitors in a market, it’s pretty easy to kind of just
wink and nod.

 You see that with wages, too. People who’ve been driving delivery
for a long time will always tell you about those early days with
Postmates, and how much money they made—it was like thirty dollars
an hour. But by 2018, 2019, everyone who was driving for these apps
was starting to wonder if they could sustain it. What a lot of drivers
have told us is that, at that point, there were a lot of incentives
[for them] to commit to regular schedules, to show up at regular
times, to the point that they would quit whatever their day job was.
And then that money goes away.

It feels like there’s the question of whether these delivery
companies are being predatory toward restaurants and how to regulate
that, and then there’s the matter of the delivery workers, and their
safety and their quality of life. Are the two actually separate, or
are they the same issue?

They’re the same issue. I don’t know if you saw, but there was
this viral post on a newsletter called Margins, where this guy was
talking about his friend who owns a few pizza restaurants, and they
screwed DoorDash with this complicated scheme.

I remember that—DoorDash posted the restaurant’s menu online
without permission, and the restaurant owner noticed their prices were
lower than his actual menu. So he just ordered his own pizza back to
himself, dozens of times, and took DoorDash’s money.

In the comments section on that post, I saw a post from a gentleman
named Collin Wallace, who was really hyped up. He says—I’m reading
it now:

I was the former Head of Innovation at Grubhub, so I have seen the
truth behind many of these claims first hand. Sadly, I invented a lot
of the food delivery technologies that are now being used for evil.
... COVID-19 is exposing the fact that delivery platforms are not
actually in the business of delivery. They are in the business of
finance. In many ways, they are like payday lenders for restaurants
and drivers. They give you the sensation of cash-'ow, but at the
expense of your long term future and financial stability. Once you
“take out this loan” you will never pay it back and it will
ultimately kill your business.

It goes on. Collin had this startup that he founded in college, and
Grubhub bought him out in 2011, 2012. He ended up going to Stanford
for business school, and he was a year behind [the DoorDash C.E.O.]
Tony Xu’s class. He told me, “I told Tony, ‘Why would you want
to get into [the delivery business]? Grubhub has this pretty locked
down.’ What I didn’t understand was the impact of zero interest
rates.” Basically, there’s all this money sloshing around, and
these venture-capital funds need somewhere to put it. They’re in the
business of trying to make monopolies, and they will throw a lot of
money at that. And in an environment of minimal, completely defunded,
completely defanged, completely ineffectual antitrust
enforcement—the Obama F.T.C. was unbelievably ineffectual, and
it’s not the first F.T.C. that has been—they understood that there
were all kinds of potential opportunities if they could just
monopolize that customer base.

My understanding is that the promise of these money-losing,
venture-funded companies is that they will eventually become
profitable, once they capture a sufficient share of the market. And
right now the delivery companies dominate the market, but they still
can’t seem to get close to profitability.

 Right. They don’t know how to get out of that business model that
they invented, how to climb out of that hole, without

 potentially yielding market share. One of our Protect Our
Restaurants members owns a restaurant in Iowa City, and they started a
co-op with seventeen other restaurants—it’s a delivery service
that operates just on a local basis. He’s set up little franchises
of his model in other cities. It’s not easy to get off the ground,
but it makes a lot more sense, because [the DoorDash model] is just
not run for the benefit of the restaurant, or even with the
restaurant’s operations in mind. There are a lot of ways that the
whole thing could be improved if these were just locally run
businesses—a restaurant coalition, or a city department of tourism,
or something like that operating the marketplace. Those are groups
that have the interests of the local dining community, and the
community at large, in mind. The whole operation [of massive,
decentralized delivery apps]—it doesn’t need to exist.

There doesn’t need to be someone a thousand miles away pushing a
button that makes a guy go pick up food from a restaurant three blocks
away from me and then bring it to my apartment.

They’re middlemen, and they make it impossible—like, if you
don’t have something, if you run out of something, what are you
going to do? You can’t call the customer. One of our members was
telling me that, one day, he opened up a customer account on his work
cell phone, and he realized that Uber Eats was telling his customers
that they were still waiting for the kitchen to finish preparing their
food. He said that these were orders that had been done for, like,
fifty minutes. He was getting all these angry calls. People were,
like, “Why is it taking you so long to make my food?” And he’s,
like, “Dude, just come in!” If people knew, they would just go get
it themselves. I mean, we have a labor shortage, and ninety-one per
cent of Americans have access to a car. So it’s not a great business
model. It’s going to be very price-sensitive.

Which aspect is price-sensitive?

If DoorDash is charging people five extra dollars for a meal, or ten
extra dollars, and you start factoring in in'ated prices, and the
litany of fees—I think that people will make this calculation and
decide “It’s not worth it. I’ll just go pick it up myself.”
That’s better for restaurants.

That seems dependent on transferring the cost to diners. Which has
happened—when cities put caps on what the delivery apps can charge
restaurants, the apps charge a fee directly to customers. In Portland,
Oregon, for example, DoorDash charged diners a two-dollar “Portland
City Mandate” fee.

Which is great. I love that solution to this problem. I can’t tell
if you’re being sarcastic.

No, I really love it, because it forces the diner to actually make
that calculation, and that’s how it should be. It’s the customer
who is receiving the service. The only service that a restaurant gets
from these apps is potential marketing, or a potential customer lead.
DoorDash claims that these commission caps are price controls, but
they’re not controls on the price that they’re allowed to charge
the customers, just on the percentage of commission that they’re
allowed to extract from restaurants. If this is a service, if it costs
something to provide, then customers should be forced to run that
calculus. There’s no benefit that anybody derives from that service
being subsidized by Silicon Valley and by restaurants who are being
held at gunpoint because they have no other options. If we didn’t
have a fee cap here in D.C., I would have felt like it was
unconscionable to order from DoorDash. But, with the fee cap, it’s,
like, OK, if I’m feeling really lazy, or I have a whole lot to do, I
can see if it makes sense to go on DoorDash.

They are working very hard to make it work. They’re working really
hard on ghost kitchens. Uber’s working really hard on alcohol
delivery—I might be a little bit worried, if I owned a liquor store,
about Uber’s ownership of [the alcohol-delivery platform] Drizly.
And then Cloud Kitchens, which is owned by [the former Uber C.E.O.]
Travis Kalanick, has apparently been amassing liquor licenses. So
they’re working to disrupt liquor stores, and they’re spending a
lot on convenience and grocery delivery. I don’t see how it ever
becomes the highest-margin business, but maybe Amazon will buy them at
the end of the day. In the meantime, Tony Xu’s a billionaire, and so
are, I think, two or three of his co-founders. So at least it’s
worked out for them.

One of the notable things about the New York bill is that, more than
we’ve seen with other cities’ regulation attempts, it focusses not
just on restaurant fees but on delivery couriers’ labor rights —
they can set their distance limits, restaurants have to allow them to
use their bathrooms.

It’s so great, and it is so horrifying. I’ve heard of times that
drivers would come into restaurants, and [the restaurant management]
would chase them away, like they were menaces. Our group was very
aggressively anti-Prop. 22 [the 2020 California ballot initiative that
exempted delivery and car-service apps from classifying gig workers as
employees]. We were always cognizant that the restaurants and the
drivers were in the same boat: the delivery apps were going to try to
present themselves as being pro-worker when it came to dealing with
the restaurants, and trying to portray the [fee caps] as being an
anti-delivery driver measure.

One of the reasons [New York’s] legislation has been specific and
strong is that Andrew Rigie [the executive director of the New York
City Hospitality Alliance, a restaurant-industry coalition] has been
working closely with Los Deliveristas Unidos and other
delivery-driver-rights groups. And New York has been focussed on this
issue for a really long time, and has a grasp of its nuances.

DoorDash, Grubhub, and Uber Eats jointly filed suit against New York
City a few weeks ago, to contest the fee caps. In California, they had
their extremely well-funded Prop. 22 campaign, though another judge
has now claimed that’s unconstitutional. Is it going to be endless
pull and push forever?

I think that many cities will be closely watching what happens with
the New York law. I was shockingly unimpressed by the apps’ lawsuit
against New York—their premise is that New York is violating their
constitutional right to equal protection under the law, and treating
restaurants as a favored industry. It’s outrageous for them to claim
to be discriminated against. There’s probably a good legal case to
be made that they should be discriminated against. All of these
companies—Amazon, Google, Facebook—they’re all where they are
because we haven’t been enforcing so many laws, chief among them the
antitrust laws. They have enough money that they’ve won most of the
battles, but I think that going up against restaurants isn’t the
same thing. People realized [during the pandemic], “Oh, all these
restaurants that we love and that have really, really low margins are
being beat up by these Silicon Valley apps,” and legislators and the
public really rallied around them. It’s conventional wisdom now that
these companies are bloodsucking middlemen. They are really greedy,
and they’ve hired a lot of fancy spin doctors, but it’s just not
that complicated an issue.

  

*
[[link removed]]
*
[[link removed]]
*
* [[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web [[link removed]]
Submit via email
Frequently asked questions [[link removed]]
Manage subscription [[link removed]]
Visit portside.org [[link removed]]

Twitter [[link removed]]

Facebook [[link removed]]

 



########################################################################

[link removed]

To unsubscribe from the xxxxxx list, click the following link:
[link removed]