New Jersey’s Political Attack on Takeout Food Delivery Service Providers

In N.J. lawmakers may limit Grubhub and other restaurant delivery fees during pandemic, Samantha Marcus (NJ Advance Media for NJ.com) reported on May 12, 2020:

Lawmakers will consider a bill Tuesday capping the fees delivery services like Grubhub and Uber Eats can charge restaurants, for whom takeout and delivery are their only lifeline during this public health crisis.

The bill (S2437) would permit these third-party sites that coordinate takeout and delivery services to charge eateries no more than 20% of the cost of an individual online order and no more than 10% when that third-party company isn’t actually making the 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% of the order price, thereby compounding the current financial strain on restaurants,” the bill says. The caps would remain effective during any state of emergency longer than seven days and would supersede any local caps already in place.

There is a lot of rationalization going on. Aside from the statement in the bill cited above, which complains of “financial strain on restaurants,” Jersey City Mayor Steven Fulop, who already “issued an executive order barring companies like DoorDash and Postmates from charging more than 10%,” says:

“For all their hard work to stay afloat and achieve profitability, these third-party fees are hindering local restaurants’ chances of survival which is simply unfair and unethical amid this health and economic crisis,” Fulop said in a statement. “Many of the restaurants have had to make a shift to relying solely on delivery and takeout under the circumstances, and this cap is our latest effort to identify any available options to provide relief to our local businesses.”

Don’t even ask where a mayor gets the power to issue such an order.

Food delivery companies have stepped up to enhance the restaurants’ “lifeline”--takeout business. Now they’re being attacked. 

If the cost of the fees of third-party delivery services are uneconomical for restaurants, why do they use them? Because on balance, the benefit outweighs the cost. But it’s pointless to point out the economic harm of price controls. Politicians who want to wield bully power against private citizens believe they are above any law. If a private restaurant owner pulled a gun on a service provider, demanding lower fees under threat of robbing him of $10,000 or $20,000, the restaurant owner would be charged with a crime. Yet, that’s precisely what these politicians are doing--acting as criminals. The penalty for charging prices not to the liking of the politicians is $10 to $20 thousand. These penalties are legalized extortion. Fulop has unimaginable nerve charging these private delivery companies with “unfair and unethical” behavior. Unless fraud is involved--and no wrongdoing has been alleged--the shoe is on the other foot. It is unethical to coercively interfere in the private voluntary contract terms between restaurants and delivery companies. It is doubly unethical, because it is tyrannical, for politicians to use the legal machinery of the state--the gun power--to impose their arbitrary price terms on private companies.

I suspect that there is a huge element of cronyism going on. In our mixed economy, it is not uncommon for businesses to lobby politicians for special favors at the expense of competitors or against trading partners whose terms they don’t like. Laws such as S2437 don’t happen in a vacuum. I have no doubt that legislators have been inundated with complaints from some restaurateurs. If that is the case, shame on them.

The right to free trade--that is, to trade in the absence of force--is fundamental to a free society. And the absence of forcible interference extends to the government, whose job it is to protect individual rights. If equal protection of the law means anything, then that protection extends to all individuals, including business owners. Free trade depends on the sanctity of contract. This law, which as of this writing has not been enacted but has passed a key Senate committee by a bipartisan 12-0 vote, is economically destructive, and immoral because it violates individual rights to freedom of association, which includes the right to voluntary contract on mutually agreed terms.

If America were truly a capitalist nation, this immoral act of powerlust would not happen. Essentially, capitalism involves the separation of economics and state. To fight for capitalism means to fight for justice. Fighting against laws such as this is what it means to fight for the separation of economics and state. A pandemic is no excuse for this law. The constitution is designed to restrain the government from violating individual rights. The fees these restaurants and delivery companies mutually agree to violate no one’s rights. The constitution does not get suspended in a pandemic. Article I, Section 10, Clause I says that “No State shall . . . pass . . .  any Law impairing the Obligation of Contracts.” Legislators, mayors, et al should honor it, pandemic or not.

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