S2437

An Act limiting certain third-party food takeout and delivery application service fees charged to restaurants and supplementing P.L.1960, c.39 (C.56:8-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that due to the current state of emergency declared in response to the COVID-19 pandemic, restaurants have been prohibited from offering dine-in service and limited to delivery and takeout offerings only, which has placed a sudden and severe financial strain on many restaurants. This emergency has also resulted in an increased use of third-party food takeout and delivery service applications to place orders with restaurants for food takeout or delivery. While some companies have provided meaningful support to the restaurant community, other companies offering third-party food takeout and delivery services may charge restaurants a service fee exceeding 30 percent of the individual order price, thereby compounding the current financial strain on restaurants. Restaurants that are also small businesses, in particular, may have limited bargaining power to negotiate lower fees. The Legislature finds that it is in the public interest to take action to maximize restaurant revenue from takeout and delivery orders to enable restaurants to survive this crisis, and any similar future crisis, and remain sources of employment and community vitality in this State.

2. a. It shall be an unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et seq.) for any third-party food takeout and delivery service application or Internet website, during a state of emergency of seven days or more, to charge a service fee to a restaurant for food take-out or delivery orders that is:

(1) greater than 20 percent of the cost of the individual order; or

(2) greater than 10 percent of the cost of the individual order, when the order is delivered by an employee of the restaurant or an independent contractor with whom the restaurant has contracted directly.

The provisions of this section shall not be construed to limit the ability of any restaurant to choose to pay a greater percentage of the cost of the individual order to access additional advertising or other products and services offered by any third-party food takeout and delivery service application or Internet website.

b. The provisions of this section shall supersede and preempt any county or municipal law, ordinance, resolution, or regulation concerning the relationship between third-party food takeout and delivery service applications or Internet websites and any restaurant utilizing its services.

c. As used in this section, “third-party food takeout and delivery service application or Internet website” means any online food ordering and delivery service that allows a consumer to place an order for takeout or delivery from a restaurant.

3. This act shall take effect immediately.

STATEMENT

This bill regulates the service fees that third-party food takeout and delivery service applications or websites may charge during a state of emergency lasting longer than seven days.

Due to the current state of emergency declared in response to the COVID-19 pandemic, restaurants have been prohibited from offering dine-in service and limited to delivery and takeout offerings only, which has placed a sudden and severe financial strain on many restaurants. This emergency has also resulted in an increased use of third-party food takeout and delivery service applications and websites, such as DoorDash, Grubhub, and Uber Eats, to place an order with restaurants for takeout or delivery. While some companies have provided meaningful support to the restaurant community, other companies offering third-party food takeout or delivery services may charge restaurants a service fee exceeding 30 percent of the order price, thereby compounding the current financial strain on restaurants. High service fees particularly hurt small businesses. Restaurants that are also small businesses, in particular, may have limited bargaining power to negotiate lower fees. It is in the public interest to take action to maximize restaurant revenue from takeout and delivery orders to enable restaurants to survive this crisis, and any similar future crisis, and remain sources of employment and community vitality in this State.

Under the provisions of this bill, it would be an unlawful practice for any third-party food takeout and delivery service application or website, during a state of emergency lasting longer than seven days, to charge a service fee to a restaurant that is: 1) greater than 20 percent of the cost of the individual order; or 2) greater than 10 percent of the cost of the individual order, when the order is delivered by an employee of the restaurant or an independent contractor with whom the restaurant has contracted directly. However, this bill does not limit the ability of any restaurant to choose to pay a greater percentage of the cost of the individual order to access additional advertising or other products and services offered by the third-party application or website.

In addition, this bill is to supersede and preempt any county or municipal law, ordinance, resolution, or regulation concerning the relationship between third-party food takeout and delivery service applications or Internet websites and any restaurants utilizing its services.

The bill defines “third-party food takeout and delivery service application or Internet website” to mean any online food order or delivery service that allows a consumer to place an order for takeout or delivery from a restaurant.

An unlawful practice under the consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.), is punishable by a monetary penalty of not more than $10,000 for first offense and not more than $20,000 for any subsequent offense. In addition, a violation can result in cease and desist order issued by the Attorney General, the assessment of punitive damages, and the awarding of treble damages and costs to the injured.