Uber Eats, Postmates agree to $10 million settlement with city

Uber Eats and Postmates have agreed to make $8.5 million in refunds to struggling Chicago restaurants — and pay $1.5 million on top of that to the city — to settle claims that the companies ignored a 15% cap on delivery fees and listed restaurants without first obtaining their consent.

During the pandemic, Chicago restaurants were fighting for survival after twice being ordered to stop serving diners indoors, then being allowed to open, but forced to limit indoor capacity to 50%.

The City Council threw restaurants a legislative life raft of sorts — allowing outdoor dining tables on the streets, sidewalks and adjacent parking lots and imposing a 15% cap on delivery fees, then extending that cap until 180 days after all pandemic-related restrictions on restaurants were repealed.

But the settlement announced Monday makes it clear that the 15% cap was widely ignored, triggering $8.5 million in refunds to over-charged or improperly listed restaurants and $1.5 million to compensate the city for the cost of investigating those abuses.

The settlement includes:

• $3.3 million that Uber, which has acquired Postmates, quietly paid in September 2021 to an untold number of Chicago restaurants charged delivery fees exceeding the 15% cap and $2.25 million in additional fees to over-charged Chicago restaurants.

• $500,000 and $2.5 million in commission waivers to compensate Chicago restaurants who choose to work with Uber again, even after being listed on Uber’s meal delivery platforms without consent at a time when they were not under contract with Uber. The company further agreed to remove the names of all restaurants improperly listed and refrain from those abuses going forward.

Josh Gold, Uber’s senior director of public policy, said the company is “pleased to put this matter behind us” and “committed to supporting” its restaurant partners.

Ald. Scott Waguespack (32nd), chairman of the City Council’s Finance Committee, vowed to re-impose the 15% cap.

“Without a permanent cap and enforcement, they ... can continue to abuse the system,” Waguespack said Monday.

“I know we allowed it to expire. But restaurants still need the help. For sure, restaurants struggled during COVID. But they still are, with the cost of doing business going up.”

Retiring Ald. Tom Tunney (44th), owner of Ann Sather Restaurants, said his restaurants pay “net delivery fees” ranging from 20% to 23%.

Tunney would like a permanent, 15% cap, but knows it may not be feasible.

“The cost of the delivery service is expensive on the consumer. It is expensive for the restaurant. And yet, people are still ordering. We’re doing about 20% of our business with these delivery services. Dining room patronage is not back to where it was pre-pandemic. So you’re making it up with these deliveries, at a high cost,” he said.

“The whole industry is not sustainable. ... The consumer is getting spoiled about these delivery services, even though they’re charging at least one-and-a-half times what you would get if you just picked up the product yourself,” he added.

“I had an order yesterday for many dozens of cinnamon rolls being picked up by Uber. So, we approached the person and said, ‘You could save yourself a lot of money if you just called the restaurant directly.’ And their answer was, ‘There’s so many coupons and bonuses by ordering on Uber.’ They’re still comfortable with the deals that Uber is trying to make in order to attract customers and get repeat customers.”

Illinois Restaurant Association President Sam Toia said roughly 22% of Chicago restaurants rely totally on pickups and deliveries. Before the pandemic, it was 10%.

“More and more people are using third-party delivery to get food delivered to their house,” Toia said.

“Maybe there’s a way we all can come to the table and try to figure this out to help our independent restaurants.”

Restaurants listed on UberEats without consent can apply for refunds and future commission waivers at Chicago.gov/UberSettlement. Restaurants charged delivery fees over and above the 15% cap will “receive payment automatically” from Uber, according to the city.

Uber noted it has been negotiating with the city for more than a year, even as the city is in “active litigation” with GrubHub and DoorDash.