As new legislative sessions get underway, and the negative economic impact from COVID-19 continues, state lawmakers are proposing policies in hopes of providing broad economic relief. Unfortunately, while well intentioned, some of these policies will do more harm than good, to the detriment of struggling businesses and taxpayers.
A specific policy that has gained some traction in several states is the implementation of price controls for food delivery services, a misguided proposal that fails to improve public health and would ultimately be harmful to businesses and local economies. Ultimately, this will result in fewer delivery drivers, condensed delivery territories, less access to goods, and a reduction in restaurant patrons.
States such as New Jersey and Oregon placed price caps on food delivery companies like Grubhub, DoorDash, and Uber Eats, with the intention of protecting independent restaurants from excessive delivery app fees. In reality, the fee cap functions as a government mandated price control, forcing businesses to pass on the cost of providing a service to the consumer or onto employees. For example, in Portland, UberEats has now included a $3 delivery fee in response to a 10 percent fee cap.
Despite evidence suggesting this policy has unintended negative consequences, Massachusetts is now proposing a delivery price cap. We would urge the Bay State, in addition to other state legislatures, to resist enacting this detrimental economic policy. Restaurants are struggling under restrictions imposed as a result of the pandemic, the last thing needed are price controls that will distort the market, harming the very businesses lawmakers are attempting to protect.
Meal delivery has become essential to the livelihood of restaurants, particularly as consumers are preferring touchless options in order to limit personal contact. As a result, delivery services have become a necessity for independent restaurants to remain solvent during this difficult time.
Similarly, the “gig economy” has provided unemployed and underemployed individuals with flexible employment options. By limiting their compensation per delivery, many will likely choose to exit the industry, leaving consumers and restaurants even more isolated.
Given delivery rates are contractually agreed to by both the delivery service and the restaurant, it would seem counterproductive for state governments to intervene in the process. It would be wise for Massachusetts Governor Charlie Baker to leave this policy matter in the hands of the private sector — where it belongs.