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HomeMy WebLinkAbout3A OCRCITY COUNCIL STAFF REPORT DATE: October 8, 2020 LEGISLATIVE SUBJECT: URGENCY ORDINANCE ESTABLISHING LIMITATIONS ON THIRD- PARTY FOOD DELIVERY FEES FROM: David H. Ready, City Manager BY: Jeff Ballinger, City Attorney SUMMARY: The City Council will consider adopting an urgency ordinance establishing a limitation on the amount that a third party delivery service may impost as a fee. The accompanying urgency ordinance is based on the third party food delivery fee ordinance that was adopted by the City of Los Angeles in June of 2020. The draft ordinance makes it unlawful for a third-party delivery service to charge a retail food service establishment a delivery fee that is more than 15 percent of the cost of the purchase price of an online order. The draft ordinance also makes it unlawful for a third-party delivery service to charge a retail food service establishment more than 5 percent of the cost of the purchase price of an online food order for the total of all other fees charged. In addition, the draft ordinance requires a third-party delivery service to disclose to the customer each fee that it charged a retail food service establishment and mandates that the drivers receive the entire gratuity paid by the customer. A violation of the draft ordinance can be enforced through a private right of action after a third-party delivery service has been given a period of 15 days to cure the violation. Due to the critical issues that retail food service establishments are faceting due to the COVID-19 emergency, the draft ordinance contains an urgency clause, so that it would become effective immediately upon adoption. As an urgency ordinance, the adoption would require a 4/5 vote by the City Council. RECOMMENDATION: Adopt Urgency Ordinance No. __ , AN URGENCY ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA ESTABLISHING LIMITATIONS ON THIRD-PARTY FOOD DELIVERY FEES ITEM NO. 3 A 2City Council Staff Report October 8, 2020 -Page 2 Third-Party Food Delivery Fee Limitation Ordinance BACKGROUND: On March 4, 2020, the Governor of the State of California declared a state of emergency in the State of California as a result of the threat of COVID-19. On March 8, 2020, the Riverside County Health Officer declared a local and public health state of emergency in response to the increased spread of COVID-19, the disease caused by the novel coronavirus. On March 17, 2020, the City Manager, as the City's Emergency Services Director, issued a shelter in place order, ordering that individuals living in the City of Palm Springs to shelter at their place of residence, excluding activities necessary to provide or receive certain essential services or engage in certain essential activities and work for essential business and government service. A similar shelter in place order was subsequently issued by the State of California. Under the very first stay at home orders in March of 2019, restaurants were prohibited from providing in-person dining, and were limited to drive through, pick-up or delivery. Although restaurants were subsequently authorized to provide in-person, indoor dining on May 12, 2020, that option was again removed by the State on July 1. After that date, and continuing until just recently--September 22--restaurants within Palm Springs were only able to provide in-person dining outdoors. As a result of the limitations placed on restaurants being able to provide in-person dining, there has been a significant increase in the use of third-party food delivery services. As a result of the increased use of such services, and concerns about the amount of service fees that were being charged, many cities began moving to impose temporary fee caps on the platforms. By June, New York, Los Angeles, San Francisco, Washington, D.C., Seattle had all set commission limits, generally ranging from 15 to 20 percent of a diner's total order. The City Council recently requested that an ordinance similar to that of the City of Los Angeles be brought back to the Council for consideration and possible adoption. The following is a summary of other California cities that have adopted similar ordinances. City of Santa Clara The City of Santa Clara adopted a temporary ordinance that deals with third-party food delivery fees. This ordinance caps fees at 15% that a third-party delivery service can charge City of Santa Clara restaurants for deliveries during the COVID-19 pandemic. This ordinance was written in response to sharp revenue declines experienced by local restaurants during the COVID-19 pandemic after being forced to close indoor dining and now rely on limited outdoor dining, pickup, and third-party applications to deliver takeout. The City's ordinance, which went into effect immediately, also prevents delivery companies from shifting costs by retaining any portion of a driver's gratuities. In addition, third-party food delivery services are now required to disclose the fees charged to app users, gratuities paid, and any discounts offered by the restaurants. 3City Council Staff Report October 8, 2020 -Page 3 Third-Party Food Delivery Fee Limitation Ordinance Santa Clara's ordinance will remain in effect until the end of the COVID-19 local emergency. City of San Francisco The City of San Francisco adopted in the ninth supplement to mayoral proclamation declaring the existence of a local emergency dated February 25, 2020. The City ordered third-party delivery services to limit fees charged to restaurants suffering losses since sit-down service. This 15% cap mandates a cut in fees, which can be up to 30% of a total bill. This cap on the delivery charges will remain effective until dine-in service is permitted. In the proclamation, it states that capping the per-order fees at 15% will accomplish the legitimate public purpose of easing the financial burden on struggling restaurants during this emergency while not unduly burdening third-party platforms, as this fee is recognized as reasonable, and third-party platforms continue to earn significant profits. More specifically, the ordinance states it is unlawful for a third-party food delivery service to charge a covered establishment a fee per online order for the use of its services that totals more than 15% of the purchase price of such online order. City of Los Angeles First Ordinance (6/10/2020): The City of Los Angeles adopted an urgency ordinance that established a temporary limit on the charges imposed by third-party food delivery services during the COVID-19 pandemic. As used in that ordinance, a delivery fee means a fee charged by a third-party food delivery service for providing a retail food establishment with a service that delivers food and beverages from such retail food establishments. A third-party food service was defined as "any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick-up of food and beverages from, no fewer than 20 retail food establishments located in the City that are each owned and operated by different persons". Los Angeles' ordinance contains several prohibitions, which are listed below: • Under the ordinance, it is unlawful for a third-party food delivery service to charge a retail food establishment a delivery fee that totals more than 15 percent of the purchase price of each online order; • It is unlawful for a third-party food delivery service to charge a retail food establishment any amount designated as a delivery fee for an online order that does not involve the delivery of food or beverages; • It is unlawful for a third-party food delivery service to charge a retail food establishment any combination of fees, commissions, or costs for the retail food establishment's use of the third-party delivery that is greater than 5 percent of the purchase price of each online order. Fees, commissions, or costs do not include delivery fee; 4City Council Staff Report October 8, 2020 -Page 4 Third-Party Food Delivery Fee Limitation Ordinance • It is 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-food delivery service or, if no price is set by the retail food establishment on the third-party food delivery service, the price listed on the retail food establishment's own menu; • It is unlawful for a third-party delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity must be paid by the third-party delivery service, in its entirety, to the person delivering the food or beverages. Additionally, under Los Angeles' ordinance, there are disclosure and enforcement provisions, both of which are discussed below. The third-party food delivery service must disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including: • The purchase price of the food and beverages at the cost listed on the retail food establishment's menu; • The delivery fee charged to the retail food establishment; • Each fee, commission, or cost, other than a delivery fee, charged to the retail food establishment; • Each fee, commission, or cost, other than the delivery fee or the purchase price of the food, charged to the customer by the third-party food delivery service; • Any tip or gratuity that will be paid to the person delivering the food or beverages. Los Angeles' ordinance has an enforcement provision, which states that a violation of the ordinance subjects the violator to the following: • A civil action in the Superior Court of the State of California to recover all actual damages resulting from a violation of the ordinance; and • Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a third-party food delivery service. A civil action alleging a violation of any provision of the Los Angeles ordinance can be instituted only after the following requirements have been met: • Written notice is provided to the third-party food delivery service of the provisions of the ordinance alleged ·to have been violated and the facts to support the alleged violation; and • . The third-party food delivery service is provided 15 days from the date of the written notice to cure any alleged violation Under Los Angeles' initial ordinance, no criminal penalties are to attach for violation of the ordinance, and the City was not authorized to impose any other (i.e., administrative) fines or penalties. Finally, the original Los Angeles ordinance had an automatic sunset provision providing 5City Council Staff Report October 8, 2020 -Page 5 Third-Party Food Delivery Fee Limitation Ordinance that it would sunset 90 days after the City's emergency order prohibiting on-premises dining is lifted. That meant that the ordinance would expire on August 31, 2020. Second Ordinance (8/26/2020): On August 14, 2020, the City of Los Angeles staff recommended that the Los Angeles City Council extend the ordinance until such time as the City is no longer under a locally declared state of emergency. In addition, due to reports of violations of the Los Angeles ordinance, Los Angeles city staff recommended that the City Attorney prepare additional amendments that would provide a means for the City to enforce the ordinance, including a monetary penalty structure and a reporting mechanism for restaurants that were overcharged. On August 26, 2020, the City of Los Angeles adopted an updated ordinance. The updated ordinance is a duplicate of the first ordinance. The only difference is that the new ordinance would make the ordinance enforceable under state and city law, including the price gouging provisions of California Penal Code section 396. In addition, the updated ordinance also replaced the sunset clause, with the new ordinance to remain effective until 90 days after the City's locally declared emergency ends. ANALYSIS: The accompanying ordinance is based on the City of Los Angeles' ordinance, originally adopted in June, and recently updated in late August. The draft ordinance makes it unlawful for a third-party delivery service to charge a retail food service establishment a delivery fee that is more than 15 percent of the cost of the purchase price of an online order. The draft ordinance also makes it unlawful for a third-party delivery service to charge a retail food service establishment more than 5 percent of the cost of the purchase price of an online food order for the total of all other fees charged. In addition, the draft ordinance requires a third-party delivery service to disclose to the customer each fee that it charged a retail food service establishment and mandates that the drivers receive the entire gratuity paid by the customer. As with Los Angeles's original ordinance, a violation of the draft ordinance can be enforced through a private right of action after a third-party delivery service has been given a period of 15 days to cure the violation. Unlike the City of Los Angeles, the draft ordinance does not provide that a violation of the City ordinance would also constitute a violation of California's anti-price-gouging law, Penal Code 396. Under that State code, a violation is a misdemeanor punishable by imprisonment in a county jail for a period not exceeding one year, or by a fine of not more than ten thousand dollars ($10,000), or by both that fine and imprisonment. Such enforcement would be investigated by City staff, such as Code Enforcement or Police Department personnel, and prosecuted by the District Attorney, as a state misdemeanor. 6City Council Staff Report October 8, 2020 -Page 6 Third-Party Food Delivery Fee Limitation Ordinance ENVIRONMENTAL ASSESSMENT: The proposed ordinance would not have any environmental impact. FISCAL IMPACT: The ordinance, as proposed, would not have any fiscal impact on the City, since it is drafted to be enforced through private causes of action; not by City code enforcement. Should the City Council include a provision that provides for enforcement by the City, there would be additional costs of investigation and enforcement, the amount of which is unknown at this time. SUBMITTED BY: .. Q~ntlr/~ Q City Attorney Attachments: A. Urgency Ordinance B. City of Los Angeles Ordinances 7ORDINANCE NO. AN URGENCY ORDINANCE OF THE CITY OF PALM SPRINGS, CALIFORNIA ESTABLISHING LIMITATIONS ON THIRD-PARTY FOOD DELIVERY FEES (four-fifths (4/5) vote required) City Attorney Summary An ordinance establishing a temporary limit on the charges imposed by third-party delivery services on retail food establishments during the COVID-19 epidemic and for 90 days after the City's locally declared emergency ends. The Council finds that these provisions should include a regulatory purpose for the promotion of public health, safety, and welfare by promoting the use of third-party delivery services, by making them more affordable, thereby reducing the need for in-person dining, and thereby reducing the risk of spread of the COVID-19 virus. WHEREAS, the City of Palm Springs is a charter city organized pursuant to Article XI of the California Constitution and pursuant to the authority so granted, the City has the power to make and enforce within its limits all ordinances and regulations with respect to municipal affairs not in conflict with its own charter. Such police powers include without limitation the ability to adopt regulations pertaining generally to the protection and promotion of the public health, safety, and welfare. WHEREAS, with that purpose and intent, the City Manager acting as Director of Emergency Services issued a Proclamation of Local Emergency regarding COVID-19 on March 14, 2020 that was ratified by City Council on March 19, 2020. A similar shelter in place order was subsequently issued by the State of California WHEREAS, under the very first stay at home orders in March of 2019, restaurants were prohibited from providing in-person dining, and were limited to drive through, pick-up or delivery. Although restaurants were subsequently authorized to provide in-person, indoor dining on May 12, 2020, that option was again removed by the State on July 1. After that date, and continuing until just recently--September 22:.-restaurants within Palm Springs were only able to provide in-person dining outdoors. As a result of the limitations placed on restaurants being able to provide in-person dining, there has been a significant increase in the use of third-party food delivery services, and reports of high delivery fees, which would tend to have the effect of discouraging the use of third party delivery services. WHEREAS, the City Council has carefully reviewed and considered all of the evidence presented in connection with the hearing on this proposed Urgency Ordinance, including, but not limited to, the staff report, and all written and oral testimony presented. 55575.18240\333445 l 0.1 8Urgency Ordinance No. __ Page 2 WHEREAS, the City Council finds that approval of this Urgency Ordinance would accomplish the following: 1. Make the use of third-party delivery services more affordable, thereby enabling an increase in their use by consumers, and thereby reducing the potential for spread of COVID-19 from in-person dining. 2. Reduce the economic impacts to retail food establishments and food consumers. THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES ORDAIN AS FOLLOWS: SECTION 1. Incorporation of Recitals. That the findings and determinations reflected above are true and correct, and are incorporated by this reference herein as the cause and foundation for the action taken by and through this Urgency Ordinance. The City Council hereby finds that this Urgency Ordinance is necessary for the current and immediate protection of the public health, safety and welfare of the City and its residents. SECTION 2. Adoption of Limits on Third Party Food Delivery Services. A. DEFINITIONS. For purposes of this ordinance, the following definitions apply· 1. "City" means the City of Palm Springs. 2. "Delivery Fee" means a fee charged by a Third-party Food Delivery Service for providing a Retail Food Establishment with a service that delivers food and beverages from such establishment to customers. The term does not include any other fee or cost that may be charged by a Third-party Food Delivery Service to a Retail Food Establishment, such as fees for listing or advertising the Retail Food Establishment on the Third-party Food Delivery Service platform or fees related to processing the online order, including, but not limited to, service fees, fees for facilitating Online Orders for pick-up, and credit card processing fees. 3. "Online Order" means an order placed by a customer through or with the assistance of a platform provided by a Third-Party Food Delivery Service, including a telephone order, for delivery or pick-up within the City. 4. "Purchase Price" means the price, as listed on the menu, for the items contained in an Online Order, minus any applicable coupon or promotional 55575.18240\33344510. l 9Urgency Ordinance No. __ Page 3 discount provided to the customer by the Retail Food Establishment through the Third-Party Food Delivery Service. This definition does not include taxes, gratuities, and any other fees or costs that may make up the total amount charged to the customer of an Online Order 5. Retail Food Establishment" means a restaurant, delicatessen bakery, coffee shop, or other eat-in or carry-out service of processed or prepared raw and ready-to-eat food or beverages. 6. "Third-party Food Delivery Service" means any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick-up of food and beverages from, no fewer than 20 Retail Food Establishments located in the City that are each owned and operated by different persons. B. PROHIBITIONS. 1. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment a Delivery Fee that totals more than 15 percent of the Purchase Price of each Online Order. 2. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any amount designated as a Delivery Fee for an Online Order that does not involve the delivery of food or beverages. 3. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any combination of fees, commissions, or costs for the Retail Food Establishment's use of the Third-party Food Delivery Service that is greater than 5 percent of the Purchase Price of each Online Order. Fees, commissions, or costs do not include Delivery Fee 4. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any fee, commission, or cost other than as permitted in Subsections 1 through 3, above. 5. 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, if no price is set by the Retail Food Establishment on the Third-Party Food Delivery Service, the price listed on the Retail Food Establishment's own menu. 6. It shall be unlawful for a Third-party Food Delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third-party Delivery Service, in its entirety, to the person delivering the food or beverages. 55575.18240\33344510.l 10Urgency Ordinance No. __ Page4 C. DISCLOSURES. The Third-party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to the following: (a) the Purchase Price of the food and beverages at the cost listed on the Retail Food Establishment's menu; (b) the Delivery Fee charged to the Retail Food Establishment; (c) each fee, commission, or cost, other than a Delivery Fee, charged to the Retail Food Establishment; (d) each fee, commission, or cost, other than the Delivery Fee or the Purchase Price of the food, charged to the customer by the Third-party Food Delivery Service; and (e) any tip or gratuity that will be paid to the person delivering the food or beverages. D. ENFORCEMENT. A violation of this ordinance shall subject the violator to the following: 1. A civil action in the Superior Court of the State of California to recover all actual damages resulting from a violation of this ordinance. 2. Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a Third-party Food Delivery Service. If plaintiff fails to prevail against a Third-party Food Delivery Service, a court may award reasonable attorneys' fees and costs to the Third-party Food Delivery Service upon a determination by the court that the plaintiff's action was frivolous. 3. A civil action alleging a violation of any provision of this ordinance shall commence only after the following requirements have been met: (a) Written notice is provided to the Third-party Food Delivery Service of the provisions of the ordinance alleged to have been violated and the facts to support the alleged violation; and (b) The Third-party Food Delivery Service is provided 15 days from the date of the written notice to cure any alleged violation. 55575.18240\333445 l 0.1 11Urgency Ordinance No. __ Page 5 4. Notwithstanding any provision of this Code, or any other ordinance to the contrary, no criminal penalties shall attach for violation of this ordinance, nor shall it be enforced as a violation of a City ordinance or emergency order. E. SUNSET. This ordinance shall automatically sunset on the date that is 90 days following the end of the locally declared emergency, unless extended by the City Council or Emergency Services Director. SECTION 3. Severability. If any section or provIsIon of this Urgency Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Urgency Ordinance shall remain valid. The City Council hereby declares that it would have adopted this Urgency Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation. SECTION 4. CEQA. The City Council determines that the adoption of this Urgency Ordinance is exempt from environmental review under the California Environmental Quality Act ("CEQA") pursuant to the following provisions of the CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Urgency Ordinance is exempt under CEQA Guidelines Section 15378(b )(5) in that it is not a "project" under CEQA, and will not result in direct or indirect physical changes in the environment. SECTION 5. Urgency Findings. Pursuant to City Charter Section 312 and California Government Code Section 36937, this Ordinance is designed to protect the health, safety and welfare of the citizens of the City of Palm Springs and becomes effective ·immediately up adoption by a four-fifths (4/5) vote of the City Council. The City Council hereby finds that there is an urgent need to adopt these regulations in order to eliminate the current and immediate threats set forth above. SECTION 6. Severability. If any section or provision of this Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance shall remain valid. The City Council hereby declares that it would have adopted this Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation. SECTION 7. Adoption, Certification, and Publication. The Mayor shall 55575.18240\333445 l 0.1 12Urgency Ordinance No. __ Page 6 sign and the City Clerk shall certify to the passage and adoption of this Urgency Ordinance and shall cause the same, or the summary thereof, to be published and posted pursuant to the provisions of law. ADOPTED THIS __ TH DAY OF ______ , 2020. ATTEST: ANTHONY J. MEJIA, MMC CITY CLERK CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) GEOFF KORS MAYOR I, ANTHONY J. MEJIA, City Clerk of the City of Palm Springs, California, do hereby certify that Urgency Ordinance No. __ is a full, true, and correct copy, and was adopted without introduction at a regular meeting of the City Council held on _______ , 2020 by the following vote: AYES: NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this ___ day of ____ , 2020. 55575.18240\333445 l 0.1 ANTHONY J. MEJIA, MMC CITY CLERK 13ORDINANCE N0.18666S An ordinance adding Article 6 to Section XX of the Los Angeles Municipal Code to establish a temporary limit on the charges imposed by third-party delivery services on retail food establishments during the COVID-19 epidemic and for 90 days after the City's Order prohibiting on-premises dining is lifted. THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS: Section 1. Article 6 is added to Chapter XX of the Los Angeles Municipal Code to read as follows: ARTICLE 6 LIMIT ON THIRD-PARTY FOOD DELIVERY SERVICE FEES SEC. 200. 70. DEFINITIONS. For purposes of this ordinance, the following definitions apply: 1. "City" means the City of Los Angeles. 2. "Delivery Fee" means a fee charged by a Third-party Food Delivery Service for providing a Retail Food Establishment with a service that delivers food and beverages from such establishment to customers. The term does not include any other fee or cost that may be charged by a Third-party Food Delivery Service to a Retail Food Establishment, such as fees for listing or advertising the Retail Food Establishment on the Third-party Food Delivery Service platform or fees related to processing the on.line order, including, but not limited to, service fees, fees for facilitating Online Orders for pick-up, and credit card processing fees. 3. "Online Order" means an order placed by a customer through or with the assistance of a platform provided by a Third-Party Food Delivery Service, including a telephone order, for delivery or pick-up within the City. 4. "Purchase Price" means the price, as listed on the menu, for the items contained in an Online Order, minus any applicable coupon or promotional discount provided to the customer by the Retail Food Establishment through the Third-Party Food Delivery Service. This definition does not include taxes, gratuities, and any other fees or costs that may make up the total amount charged to the customer of an Online Order. 1 145. "Retail Food Establishmenf' means a restaurant, delicatessen, bakery, coffee shop, or other eat-in or carry-out service of processed or prepared raw and ready-to-eat food or beverages. 6. "Third-party Food Delivery Service" means any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick-up of food and beverages from, no fewer than 20 Retail Food Establishments located in the City that are each owned and operated by different persons. SEC. 200.71. PROHIBITIONS. 1. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment a Delivery Fee that totals more than 15 percent of the Purchase Price of each Online Order. 2. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any amount designated as a Delivery Fee for an Online Order that does not involve the delivery of food or beverages. 3. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any combination of fees, commissions, or costs for the Retail Food Establishment's use of the Third-party Food Delivery Service that is greater than 5 percent of the Purchase Price of each Online Order. Fees, commissions, or costs do not include Delivery Fee 4. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any fee, commission, or cost other than as permitted in Subsections 1 through 3, above. 5. 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, if no price is set by the Retail Food Establishment on the Third-Party Food Delivery Service, the price listed on the Retail Food Establishment's own menu. 6. It shall be unlawful for a Third-party Food Delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third-party Delivery Service, in its entirety, to the person delivering the food or beverages. SEC. 200.72. DISCLOSURES. The Third-party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to the following: 2 15(a) the Purchase Price of the food and beverages at the cost listed on the Retail Food Establishment's menu; (b) the Delivery Fee charged to the Retail Food Establishment; (c) each fee, commission, or cost, other than a Delivery Fee, charged to the Retail Food Establishment; (d) each fee, commission, or cost, other than the Delivery Fee or the Purchase Price of the food, charged to the customer by the Third-party Food Delivery Service; (e) any tip or gratuity that will be paid to the person delivering the food or beverages; SEC. 200.73. ENFORCEMENT. A violation of this article shall subject the violator to the following: 1. An action in the Superior Court of the State of California to recover all actual damages resulting from a violation of this article. ,. 2. Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a Third-party Food Delivery Service. If plaintiff fails to prevail against a Third-party Food Delivery Service, a court may award reasonable attorneys' fees and costs to the Third-party Food Delivery Service upon a determination by the court that the plaintiffs action was frivolous. 3. A civil action alleging a violation of any provision of this article shall commence only after the following requirements have been met: a. 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 b. The Third-party Food Delivery Service is provided 15 days from the date of the written notice to cure any alleged violation. 4. Notwithstanding any provision of this Code, or any other ordinance to the contrary, no criminal penalties shall attach for violation of this article. SEC. 200.74. SUNSET. This article shall sunset 90 days after the City's Public Order, first issued March 19, 2020, prohibiting on-premises dining is lifted. 3 16SEC. 200.75. SEVERABILITY. If any subsection, sentence, clause or phrase of this article is for any reason held to be invalid or unconstitutional by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this article. The City Council hereby declares that it would have adopted this article and each and every subsection, sentence, clause, and phrase thereof not declared invalid or unconstitutional, without regard to whether any portion of the article would be subsequently declared invalid or unconstitutional. Sec. 2. Urgency Clause. The City Council finds and declares that this ordinance is required for the immediate protection of the public peace, health, and safety for the following reason: The State of California and the City of Los Angeles have declared a state of emergency due to the novel COVID-19 virus pandemic. Residents are subject to "Safer at Home" orders and Retail Food Establishments are closed for on-premises dining and can only sell food to customers for delivery and pick-up. Many Retail Food Establishments use Third-party Food Delivery Services, and due · to the high fees imposed by Third-party Food Delivery Services, must increase food prices to stay in business. Residents who rely on food delivery may be not be able to absorb increased food prices. Also, some Retail Food Establishments being charged high fees struggle to remain financially viable. If these Retail Food Establishments close, their workers will lose employment, which affects their ability to feed and shelter their families. For all these reasons, the ordinance shall become effective upon publication pursuant to Los Angeles Charter Section 253. 4 17Sec. 3. The City Clerk shall certify to the passage of this ordinance and have it published in accordance with Gouncil policy, either in a daily newspaper circulated in the City of Los Angeles or by posting for ten days in three public places in the City of Los Angeles: one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall; one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall East; and one copy on the bulletin board located at the Temple Street entrance to the Los Angeles County Hall of Records. Approved as to Form and Legality MICHAEL N. FEUER. City Attorney ~.11/ -'-G----a_v ~RES Senior Assistant City Attorney Date '> f (. { 'Jo File No. 20-0470 ______________ ........_ _____ _ M:\GENERAL COUNSEL DIVISION\ORDINANCES AND REPORTS\ORDINANCES • FINAL YELLOW\Third Party Food DeUver Fees 5-26-20.docx The Clerk of the City of Los Angeles hereby certifies that the foregoing ordinance was passed by the Council of the City of Los Angeles, by a vote of not less than three-fourths of all its members. CITY CLERK Ordinance Passed)6/03/2Q2Q Published Date: 06/10/2020 Ordinance Effective Date: 06/10/2020 Council File No.: 20-0470 MAYOR [G ., . ., Approved 06/05/2020 18ORDINANCE NO. -------An ordinance adding Article 6 to Chapter XX of the Los Angeles Municipal Code to establish a temporary limit on the charges imposed by third-party delivery services on retail food establishments when they are not operating at full capacity due to the COVID-19 pandemic. THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS: Section 1. Article 6 is added to Chapter XX of the Los Angeles Municipal Code to read as follows: ARTICLE 6 LIMIT ON THIRD-PARTY FOOD DELIVERY SERVICE FEES SEC. 200.70. DEFINITIONS. For purposes of this ordinance, the following definitions apply: 1. "City" means the City of Los Angeles. 2. "Delivery Fee" means a fee charged by a Third-party Food Delivery Service for providing a Retail Food Establishment with a service that delivers food and beverages from such establishment to customers. The term does not include any other fee or cost that may be charged by a Third-party Food Delivery Service to a Retail Food Establishment, such as fees for listing or advertising the Retail Food Establishment on the Third-party Food Delivery Service platform or fees related to processing the Online Order, including, but not limited to, service fees, fees for facilitating Online Orders for pick-up, and credit card processing fees. 3. "Online Order" means an order placed by a customer through or with the assistance of a platform provided by a Third-party Food Delivery Service, including a telephone order, for delivery or pick-up within the City. 4. "Purchase Price" means the price, as listed on the menu, for the items contained in an Online Order, minus any applicable coupon or promotional discount provided to the customer by the Retail Food Establishment through the Third-Party Food Delivery Service. This definition does not include taxes, gratuities, and any other fees or costs that may make up the total amount charged to the customer of an Online Order. 1 195. "Retail Food Establishment" means a restaurant, delicatessen, bakery, coffee shop, or other eat-in or carry-out service of processed or prepared raw and ready-to-eat food or beverages. 6. "Third-party Food Delivery Service" means any website, mobile application, or other internet service that offers or arranges for the sale of food and beverages prepared by, and the delivery or pick-up of food and beverages from, no fewer than 20 Retail Food Establishments located in the City that are each owned and operated by different persons. SEC. 200.71. PROHIBITIONS. 1. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment a Delivery Fee that totals more than 15 percent of the Purchase Price of each Online Order. 2. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any amount designated as a Delivery Fee for an Online Order that does not involve the delivery of food or beverages. 3. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any combination of fees, commissions, or costs for the Retail Food Establishment's use of the Third-party Food Delivery Service that is greater than 5 percent of the Purchase Price of each Online Order. Fees, commissions, or costs do not include Delivery Fee. 4. It shall be unlawful for a Third-party Food Delivery Service to charge a Retail Food Establishment any fee, commission, or cost other than as permitted in Subsections 1 through 3, above. 5. 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, if no price is set by the Retail Food Establishment on the Third-party Food Delivery Service, the price listed on the Retail Food Establishment's own menu. 6. It shall be unlawful for a Third-party Food Delivery service to retain any portion of amounts designated as a tip or gratuity. Any tip or gratuity shall be paid by the Third-party Delivery Service,-in its entirety, to the person delivering the food or beverages. SEC. 200.72. DISCLOSURES. The Third-party Food Delivery Service shall disclose to the customer an accurate, clearly identified, and itemized cost breakdown of each transaction, including, but not limited to, the following: 2 20(a) the Purchase Price of the food and beverages at the cost listed on the Retail Food Establishment's menu; (b) the Delivery Fee charged to the Retail Food Establishment; (c) each fee, commission, or cost, other than a Delivery Fee, charged to the Retail Food Establishment; (d) each fee, commission, or cost, other than the Delivery Fee or the Purchase Price of the food, charged to the customer by the Third-party Food Delivery Service; and (e) any tip or gratuity that will be paid to the person delivering the food or beverages. SEC. 200.73. ENFORCEMENT. A violation of this article shall subject the violator to the following: 1. An action in the Superior Court of the State of California to recover all actual damages resulting from a violation of this article. 2. Reasonable attorneys' fees and costs awarded by a court to a plaintiff that prevails in an action against a Third-party Food Delivery Service. If plaintiff fails to prevail against a Third-party Food Delivery Service, a court may award reasonable attorneys' fees and costs to the Third-party Food Delivery Service upon a determination by the court that the plaintiff's action was frivolous. 3. A civil action alleging a violation of any provision of this article shall commence only after the following requirements have been met: (a) 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 (b) The Third-party Food Delivery Service is provided 15 days from the date of the written notice to cure any alleged violation. 4. The remedies in Subsections 200.73.1 through 200.73.3 are non-exclusive. A violation of this article is unlawful and may be prosecuted under state and City law, including, but not limited to, Section 396 of the California Penal Code or Section 47.12 of the Los Angeles Municipal Code. 3 21SEC. 200.74. OPERATIVE DATES. This article shall be operative at any time during which a federal, state, or local order, resulting from the COVID-19 pandemic, limits customer capacity to less than full capacity at Retail Food Establishments in the City of Los Angeles, and for a period of 90 days after any such federal, state, or local order is lifted. SEC. 200.75. SEVERABILITY. If any subsection, sentence, clause or phrase of this article is for any reason held to be invalid or unconstitutional by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this article. The City Council hereby declares that it would have adopted this article and each and every subsection, sentence, clause, and phrase thereof not declared invalid or unconstitutional, without regard to whether any portion of the article would be subsequently declared invalid or unconstitutional. Sec. 2. Urgency Clause. The City Council finds and declares that this ordinance is required for the immediate protection of the public peace, health, and safety for the following reason: The State of California and the City of Los Angeles have declared a state of emergency due to the novel COVID-19 virus pandemic. Retail Food Establishments have been closed, been limited to serving customers outside, or have been subjected to limits on indoor customer capacity, due to social distancing requirements. While Retail Food Establishments are closed or limited in their ability to utilize indoor premises at full capacity, they are highly reliant on Third-party Food Delivery Services. Due to the high fees imposed by Third-party Food Delivery Services, many Retail Food Establishments must increase food prices to stay in business. Residents who rely on food delivery may be not be able to absorb increased food prices. Also, some Retail Food Establishments being charged high fees struggle to remain financially viable. If these Retail Food Establishments close, their workers will lose employment, which affects their ability to feed and shelter their families. For all these reasons, the ordinance shall become effective upon publication pursuant to Los Angeles Charter Section 253. 4 22Sec. 3. The City Clerk shall certify to the passage of this ordinance and have it published in accordance with Council policy, either in a daily newspaper circulated in the City of Los Angeles or by posting for ten days in three public places in the City of Los Angeles: one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall; one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall East; and one copy on the bulletin board located at the Temple Street entrance to the Los Angeles County Hall of Records. Approved as to Form and Legality MICHAEL N. FEUER, City Attorney By ~"-~IE L. FLO~Er Senior Assistant City Attorney Date ~I\ l:zo -------------File No. 20-04 70 ------------M:\GENERAL COUNSEL DIVISION\ORDINANCES AND REPORTS\ORDINANCES -FINAL YELLOW\Third Party Delivery Fees Reinstated -9.1.20.docx The Clerk of the City of Los Angeles hereby certifies that the foregoing ordinance was passed by the Council of the City of Los Angeles, by a vote of not less than three-fourths of all its members. CITY CLERK Ordinance Passed ____ _ MAYOR Approved _______ _