NYC Consumer Data Bill Likely to Drive Up Food Delivery Prices
Legislation passed by New York City’s city council will be a hard bite to swallow for food delivery apps and their customers alike.
Sponsored by Councilman Keith Powers, the new consumer data bill requires third-party delivery services, like Grubhub, DoorDash and UberEats, to hand over customers’ names, phone numbers, email addresses and delivery addresses to the restaurants they order from upon the restaurant’s request, provided that the customer consents. This is a marked improvement on the bill’s original draft, which raised serious consumer privacy concerns as it didn’t give customers the option to opt out, didn’t require that restaurants themselves request the data, and allowed restaurants to sell the data to third parties. However, it could nonetheless make life in the Big Apple more difficult by undermining delivery services, which may be forced to raise prices for customers.
Delivery services are essential — they served millions of Americans during the pandemic, provided jobs to countless others, and helped keep the city’s eateries in business. And their own business models rely on a combination of fees for each order processed as well as retaining data, which they use for marketing and optimizing customer service. Forcing these apps to hand over this data — essentially turning them into free referral services for restaurants — would force them to raise prices to compensate for their lost advantage- especially since many of these companies already run at a loss. And by driving up prices and hence deterring customers, the bill would harm restaurants too. Especially smaller or new ones that rely more on these apps to generate brand awareness. Delivery services already provide immense value for restaurants by taking care of delivery logistics, handling payments and bringing in new customers.
Conversely, the New York City Hospitality Alliance, a trade association of restaurants who backed the bill, argue that it’ll remove an important barrier that the apps place between eateries and their customers, thereby allowing restaurants to manage relationships directly with those who patronize them, including through marketing and offering deals. It would hence provide some welcome relief after a damaging pandemic period.
But this doesn’t mean that the bill is necessary. Services that allow restaurants to access the data that delivery apps collect already exist. For instance, DoorDash offers products like Storefront, Drive and Self-Delivery, which allow restaurants to access customers through their platform while keeping their data. And Grubhub recently launched its own product that allows restaurants to make their own websites for placing orders while retaining customer data. Restaurants can even gather their own customer data without working with the delivery apps by offering their own food delivery service, providing incentives for customers to share data through loyalty or rewards programs, or paying referral sites to obtain information. Such arrangements only benefit customers by giving them greater choice through encouraging competition in seeking their data and repeated patronage. Why deter them by allowing some businesses, i.e. restaurants, to piggy-back off others for free?
The NYC Consumer Data bill may be a well-intentioned proposal for assisting the city’s restaurants during and after a rough time for their industry. But supporting one industry doesn’t mean that another should be harmed, or that ordinary New Yorkers who want to enjoy a conveniently delivered meal should be left with fewer options or forced to pay more for their grub than they already do. For these reasons, the bill should be dumped.
Satya Marar is a Sydney and Washington DC-based policy professional, foreign-trained lawyer and tech fellow at Young Voices.