The relevant language reads:
“[a] food delivery platform shall not arrange for the delivery of an order from a food facility without first obtaining an agreement with the food facility expressly authorizing the food delivery platform to take orders and deliver meals prepared by the food facility.” (Business and Professions Code Section 22.4)
With the proliferation of food delivery platforms, many restaurant owners became concerned because they cannot control the delivery of the food, including ensuring that the food was delivered in a timely manner and under conditions in compliance with health guidelines. Also, many restaurants utilize their own delivery platforms, and have strong business concerns that unauthorized food delivery platforms cut into profitability. Because consumers often assume there is some sort of relationship between the restaurant and the platform, issues and complaints arising from delivery of the food usually go directly to the restaurants. State Assemblywoman Lorena Gonzalez, who introduced the bill, stated that the enacted law will provide protection to restaurant businesses, including small and family-owned businesses, and allow them to push back on the platforms if the business does not wish to participate.
There are several other similar bills under consideration in other states and municipalities across the country. For example, a Rhode Island bill (House Bill 7414) would prohibit third-party companies from listing non-partnered restaurants. The bill states: “This act would prohibit third-party delivery services from using any likeness or intellectual property of a merchant without written consent.” Under the Rhode Island bill, restaurants and other merchants can file lawsuits to recover actual damages or up to $5,000, whichever is greater. The bill also imposes fines of $1,000 per violation per day on third-party services that violate the proposed law. While the text of the California legislation does not expressly provide for enforcement and penalties, an aggrieved restaurant owner can likely bring suit based on noncompliance with the new law under the California Business and Professions Code Section § 17200 for unfair business practices.
The law will go into effect on January 1, 2021, which is timely given that the current pandemic has given the delivery platforms a boost in business. Looking at the combined revenue of the top four food delivery platforms, the pandemic has more than doubled Americans’ use of these platforms as compared to the prior year. The law will define “food delivery platform” as “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.”
Food delivery platforms have in many ways been very positive for restaurants, and their increasing popularity demonstrates that a consumer need is being filled. The new state laws serve to provide clear guideposts for the relationships between restaurants and platforms.
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