Title
Final Passage of Ordinance Amending Alameda Municipal Code by Amending Article XIX (the Third-Party Food Delivery Services) of Chapter VI (Businesses, Occupations and Industries) to Continue Placing Limits on Charges Imposed by Third-Party Food Delivery Services; Define Core Product Offering to Mean a Service; and Other Amendments. (Community Development 24161823)
Body
The staff report for this ordinance was included when the ordinance was introduced and is available at the following link:
<https://alameda.legistar.com/LegislationDetail.aspx?ID=6040138&GUID=4E996C76-6802-4A34-9761-F82D02EBC87F&Options=&Search=&FullText=1>
CITY OF ALAMEDA ORDINANCE NO. _____
New Series
INTRODUCTION OF ORDINANCE AMENDING ALAMEDA MUNICIPAL CODE SECTION 6-62 (THIRD-PARTY FOOD DELIVERY SERVICES) OF ARTICLE XVIII (FAIR HOUSING AND TENANT PROTECTIONS) OF CHAPTER VI (BUSINESSES, OCCUPATIONS AND INDUSTRIES) TO CONTINUE PLACING LIMITS ON CHARGES IMPOSED BY THIRD-PARTY DELIVERY SERVICES; DEFINE CORE PRODUCT OFFERING TO MEAN A SERVICE; AND OTHER AMENDMENTS
WHEREAS, the County of Alameda has more than 1,200 full-service restaurants, more per capita than the State average, and the City of Alameda is home to a diverse and vibrant food and beverage scene; and
WHEREAS, restaurants are vital to the character that makes Alameda such a special place; and
WHEREAS, restaurants are a critical component of the U.S. food supply chain and during the COVID-19 pandemic, restaurants were restricted to takeout or delivery offerings and continue to have limited dining with decreased capacity. This has placed a sudden and severe financial strain on these local businesses, particularly those that already operate on thin margins, adding to financial pressures in the industry that predate the COVID-19 crisis; and
WHEREAS, customers ordering takeout or delivery from Alameda restaurants frequently do so via third-party food delivery service platforms and these third-party platforms charge restaurants fees and surcharges for use of their services; and
WHEREAS, service agreements between some restaurants and third-party platforms provide for the payment of fees and charges that can range, in jurisdictions where no caps are in place, from 15% of the purchase price per order to up to 30% of the purchase price per order; and
WHEREAS, while some restaurants negotiated such fees and surcharges prior to the COVID-19 pandemic, the pandemic and the ensuing emergency has made deliveries a principal means of restaurant operations; and
WHEREAS, research indicates that restaurants were among the most hard-hit businesses during the height of the pandemic, and continue to experience challenges as the economy recovers including, but not limited to, chronic understaffing, inflationary pressures, and supply chain; and
WHEREAS, restaurants report that despite improvements in business activity compared to the early months of the COVID-19 pandemic, they continue to struggle with ongoing concerns related to the COVID-19 pandemic such as the apprehension of customers to return to in-person dining at pre-pandemic levels; and
WHEREAS, for many Alameda restaurants, and particularly for those which do not have large areas available for outdoor dining, delivery and take-out services have become a primary source of income; and
WHEREAS, the number of consumers using food delivery platforms to place orders with restaurants has increased significantly and is expected to continue at higher levels in the coming years; and
WHEREAS, as restaurants must rely on food delivery platforms to meet consumer demand, it is anticipated that delivery platforms will continue to play an increasing role in the restaurant industry going forward; and
WHEREAS, restaurants have expressed a desire to maintain the services they are currently being provided at current pricing levels; and
WHEREAS, if Alameda restaurants close as a result of high fees from third-party delivery services, their workers will lose employment and vulnerable customers will lose essential services, thereby affecting their ability to provide for their families and to remain safe during the COVID-19 pandemic; and
WHEREAS, other cities have adopted limits on delivery service fees, and in response online platforms have fought back by increasing fees to consumers and reduced delivery radius thereby frustrating local regulation adopted to address impacts to consumers who are sheltering in place and restaurant workers; and
WHEREAS, any such end-run actions by third-party food delivery companies and restaurant closures due to exorbitant delivery fees will also further limit food options for residents, could place vulnerable residents in untenable positions of not being able to obtain life sustaining food, and further disrupt US food supply chain; and
WHEREAS, restaurants report that were it not for the delivery fee cap within the City established by ordinance, they would no longer be in business; and
WHEREAS, adopting a combined cap on per-order fees charged to consumers and restaurants at 15% will accomplish the legitimate public purpose of easing the financial burden on struggling restaurants, their employees, and consumers, and maintain reliability regarding the cost of third-party food delivery services, while safeguarding their health and welfare, and that of their employees and consumers, during this emergency and not unduly burdening third-party platforms; and
WHEREAS, food service delivery programs will likely continue to be used by City residents because some form of social distancing, masking, and other health measures, all of which reduce in-person service capacity, are expected to continue for the foreseeable future, given the ever-present prevalence of respiratory pathogens, including variants and subvariants of the COVID-19 virus, Respiratory Syncytial Virus (RSV), Influenza, etc.; and
WHEREAS, by the staff report, testimony, and documentary evidence presented at the March 7, 2023 City Council meeting, the City Council has been provided with additional information upon which the findings and actions set forth in this ordinance are based.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
ALAMEDA as follows:
Section 1: Alameda Municipal Code Section 6-62 (Third-Party Delivery Services) is hereby amended to read as follows:
6-62 Third-Party Food Delivery Services 6-62.1 Definitions
City means the City of Alameda.
Core Product Offering means a service that (1) lists a Retail Food Establishment, and makes the Retail Food Establishment discoverable, with reasonable effort, on all modalities or platforms offered by a Third-Party Food Delivery Service, including but not limited to any website, mobile application, or other internet service where a Third-Party Food Delivery Service lists Retail Food Establishments; and (2) facilitates and/or performs the delivery (through the Third-Party Food Delivery Service, Retail Food Establishments, or any other means) of food and/or beverages from Retail Food Establishments to customers. The purpose of this definition is to ensure that Retail Food Establishments have an affordable means of obtaining basic services from Third-Party Food Delivery Services while preserving their freedom to contract for more services at a higher rate. Accordingly, Core Product Offering does not include any other service that may be provided by a Third-Party Food Delivery Service to a Retail Food Establishment, including but not limited to advertising services, search engine optimization, business consulting, or payment processing.
Consumer Price Index means the Consumer Price Index for All Urban Consumers ("CPI-U") for the San Francisco-Oakland-Hayward, CA Region, published by the U.S. Department of Labor, Bureau of Labor Statistics.
Service Fee means any fee charged by a Third-Party food Delivery Service to a Retail Food Establishment for providing the Retail Food Establishment with a service that delivers or assists the purchase of food and beverages from such establishment to customers.
Online Order means a food and/or beverage order placed by a customer through a platform provided by a Third-Party Food Delivery Service, including a telephone or software- or application-based order, for delivery or pick-up within the City.
Purchase Price means the price, as listed on the menu, for the items contained in an online order. This definition does not include taxes or gratuities that may make up the total amount charged to the customer of an online order.
Retail Food Establishment means a restaurant, delicatessen, bakery, coffee shop, or other eat-in or carry-out service of processed or prepared food or beverages.
Third-party Food Delivery Service means an online business that acts as an intermediary between consumers and multiple food facilities to submit food orders from a consumer to a participating food facility, and to arrange for the delivery of the order from the food facility to the consumer.
6-62.2 Prohibitions
a. It shall be unlawful for a Third-Party Food Delivery Service to charge a Retail Food Establishment a Service Fee that totals more than fifteen percent (15%) of the Purchase Price of each Online Order, except as otherwise provided for in this Article.
b. It shall be unlawful for a Third-Party Food Delivery Service to increase any fee, cost, or commission, or establish any new fee, cost or commission, with respect to customers beyond those established on September 3, 2020, except that with respect to flat fees (i.e., non-percentage fees), such fees may be adjusted annually from 2020 onward by the percentage change in the Consumer Price Index for the twelve (12) month period ending April of each year and rounded to the nearest one-tenth of a percent.
c. It shall be unlawful for a Third-Party Food Delivery Service to charge a customer any Purchase Price for a food or beverage item that is higher than the price set by the Retail Food Establishment on the Third-Party Food Delivery Service or at the time of the order.
d. It shall be unlawful for a Third-Party Food Delivery Service to retain any portion of amounts designated as a tip or gratuity for a Online Order. Any tip or gratuity shall be paid by the Third-Party Delivery Service, in its entirety, to the person delivering the food and/or beverages.
e. It shall be unlawful for a Third-Party Food Delivery Service to collect any fee from a Retail Food Establishment or its customers for a telephone order if a telephone call between such establishment and a customer made to place the order does not result in an actual transaction.
f. Beginning on March 1, 2023, the fee limit in subsection (a) of this Section 6-62.2 shall not apply to a Third-Party Food Delivery Service that does both of the following:
(1) offers all Retail Food Establishments the option to obtain or restore Core Product Offering for a total fee, commission, or charge not to exceed 15% of the purchase price of the online order, without requiring the purchase of additional services; and
(2) notifies any affected Retail Food Establishment in writing of the ability of the option described in subsection (e)(1), and obtain a written wavier from the Retail Food Establishment of their rights under subsection (a) of this Section 6-62.2. Retail Food Establishments shall have the right to rescind any such waiver, in writing, at any time.
g. Contracts between a Third-Party Food Delivery Service and a Retail Food Establishment shall clearly define the fees, commissions, or charges associated with contracted services.
6-62.3 Disclosure Requirements
a. Upon a request by a customer, the a Third-Party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction between the customer and a Retail Food Establishment that occurred through or was otherwise facilitated by the Third-Party Food Delivery Service, including but not limited to the following:
1. The Purchase Price of the food and beverage;
2. A notice, if applicable, that the Third-Party Food Delivery Service charges a fee, commission, or cost to the Retail Food Establishment, fees, costs, or commissions charged to the Retail Food Establishment for delivery services, unless the Retail Food Establishment directs that the Third-Party Food Delivery Service disclose to customers the delivery fee charged to the Retail Food Establishment and each fee, commission, or cost charged to the Retail Food Establishment;
3. All fees, costs, or commissions charged to the customer by the Third-party Food Delivery Service; and
4. Any tip or gratuity.
b. The Third-Party Food Delivery Service shall annually disclose to the City a current breakdown of the proportion of businesses within the City electing to maintain Core Product Offering in comparison to those electing to purchase additional marketing services.
6-62.4 Enforcement
a. Any person who violates any provision of this article shall be guilty of an infraction which shall be punishable by a fine not exceeding two hundred fifty ($250.00) dollars, or a misdemeanor, which shall be punishable by a fine not exceeding one thousand ($1,000.00) dollars, or by imprisonment in the County Jail for a period not exceeding six (6) months, or by both such fine and imprisonment.
b. Any person who violates any provision of this article may be subject to administrative citations issued pursuant to Article 1-7 of this Code.
c. The City Attorney, pursuant to Section 1-5.3 of this Code, or any aggrieved private party, may enforce, and seek to enjoin any violation of, this Article by means of a civil action. The burden of proof in such cases shall be preponderance of the evidence. As part of any civil action brought by the City to enforce this article, a court shall assess a civil penalty in an amount up to one thousand ($1,000.00) dollars per violation, against any person who commits, continues to commit, operates, allows or maintains any violation of this article.
d. Any person convicted of violating any provision of this article in a criminal case or found to be in violation of this article in a civil or administrative case brought by a law enforcement agency, including but not limited to the City of Alameda, shall be ordered to reimburse the City and other participating law enforcement agencies their full investigative costs.
e. Any civil action initiated by a private party alleging a violation of any provision of this Article shall commence only after the following requirements have been met:
1. Written notice is provided to the Third-Party Food Delivery Service of the provisions of the Article alleged to have been violated and the facts to support the alleged violation; and
2. The Third-Party Food Delivery Service is provided fifteen (15) days from the date of the written notice to cure any alleged violation.
f. This Article is not intended to, and does not, create any rights or benefits, substantive or procedural, enforceable at law or in equity, against the City of Alameda, its departments, officers, or employees.
g. The remedies provided in this Article are cumulative, and nothing in this Article shall preclude any person from seeking any other remedies, penalties or procedures provided by law.
6-62.6 Exception
a. Nothing in this Article shall be construed as imposing a limitation on Third-Party Food Delivery Service if doing so would be in violation of the Constitution of the United States, the Constitution of the State of California, or any applicable California state or federal law, as determined by an independent City hearing officer pursuant to this Section. Accordingly, the requirements of this article shall not apply or shall be limited to an extent to avoid any unconstitutional or unlawful deprivation of the Third-Party Food Delivery Service's rights.
b. Notwithstanding the limitations set forth in Section 1-8.01 <https://library.municode.com/ca/alameda/codes/code_of_ordinances?nodeId=CHIGE_1-8HEPRHEOFDEADRE_1-8.01HEPRHEOFDEADRE>(a) of this Code, any Third-Party Food Delivery Service seeking an exception from the requirements of this Article shall file an application with the City that includes each and every contested issue or basis for the application, along with relevant evidence in support thereof, which shall be reviewed by a City hearing officer and constitute the City's final decision on the matter.
c. The burden of establishing by satisfactory factual proof of a constitutional deprivation, by a preponderance of the evidence, shall be on the Third-Party Food Delivery Service.
d. No exception or limit shall be granted pursuant to this section unless a finding is made, based on satisfactory factual proof provided by the Third-Party Food Delivery Service, of a constitutional or applicable statutory deprivation.
6-62.7 Implementing Regulations
The City Manager, or his/her designee, shall have the authority to adopt all necessary guidelines, procedures, and regulations to implement the requirements and fulfill the policies and purposes of this Article.
6-62.8 Sunset
This article shall sunset and be of no further force or effect after May 1, 2025, unless otherwise extended by successor legislation.
Section 2: IMPLIED REPEAL
Any provision of the AMC inconsistent with this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to the extent necessary to effectuate this Ordinance.
Section 3: CEQA DETERMINATION
The City Council finds and determines that the adoption of this ordinance does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
Section 4: SEVERABILITY
If any provision of this Ordinance is held by a court of competent jurisdiction to be invalid, this invalidity shall not affect other provisions of this Ordinance that can be given effect without the invalid provision and therefore the provisions of this Ordinance are severable. The City Council declares that it would have enacted each section, subsection, paragraph, subparagraph and sentence notwithstanding the invalidity of any other section, subsection, paragraph, subparagraph or sentence.
Section 5: EFFECTIVE DATE
This Ordinance shall be in full force and effect from and after the expiration of thirty (30) days from the date of its final passage.
Presiding Officer of the City Council
Attest:
Lara Weisiger, City Clerk
* * * * *
I, the undersigned, hereby certify that the foregoing Ordinance was duly and regularly adopted and passed by the Council of the City of Alameda in a regular meeting assembled on the 21st day of March, 2023, by the following vote to wit:
AYES: NOES: ABSENT:
ABSTENTIONS:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of said City this 22nd day of March, 2023.
Lara Weisiger, City Clerk City of Alameda
Approved as to form:
Yibin Shen, City Attorney City of Alameda