The St. Louis Board of Aldermen just passed a bill that could have serious negative effects on St. Louis City consumers. The bill, which I discussed in a previous blog post, mandates a cap on delivery fees that food delivery services can charge restaurants in the city at 5 percent. Not only is this government overreach, but there will likely be negative consequences for delivery consumers.
The government overreach here is clear: Lawmakers want to change the market and pick the winners (restaurants) and losers (food delivery services) themselves. Businesses and food delivery services have been operating with mutually agreed upon rates for years. Restaurants aren’t being duped here; they’re not forced to work with delivery services, but agree to do so in order to serve more customers. There is really no reason for the government to get involved at all.
How could this bill effect those of us using food delivery services?
If delivery fee caps are implemented, who would make up the monetary difference between the previously agreed upon service rate (which reportedly is often 25 to 50 percent) and the cap of 5 percent? It seems unlikely that food delivery services would continue business as usual after this huge hit. It’s much more likely that delivery services would increase fees for consumers (since they can’t increase fees for businesses) or reduce their now-unprofitable business dealings in St. Louis City.
We could also see less pay and fewer job opportunities for delivery drivers as food delivery services try to make up for lost earnings. This could hurt restaurants as well. If there are fewer delivery options or fees get too high, customers may simply stop ordering delivery from local restaurants.
Though intended to help small businesses, this bill could ultimately hurt consumers, delivery drivers, and restaurants in St. Louis City. I realize that we are living in unprecedented times, but we don’t want to fall into the bad habit of allowing lawmakers to control our markets. Prices should be set in the market by supply and demand and consumer preferences; lawmakers do not belong in business and market decisions.