With gas nearing $5 a gallon and inflation rising faster than paychecks, working families need relief. Policymakers can start by cracking down on the extortionate fees that giant app-based platform corporations like Uber and DoorDash charge workers, consumers, and small businesses—fees that drive up costs for everyone and siphon money out of local communities.
Uber, with its near-monopoly in the app-based ride-hailing industry of about 85% of the market, has dramatically increased its cut or “take rate” on each ride—from a fixed percentage of 15-20% a few years ago, to now taking a variable and algorithmically-determined cut that now surpasses 50% on average. A rider taking an Uber might pay $100 for a ride to the airport only to find out that their driver is taking home just $50—and after paying for gas, insurance, and other vehicle costs is typically netting less than minimum wage.
Uber’s sky-high take rates are far in excess of those charged on other types of online platforms, like e-commerce marketplaces where they average 10-15%, or freelance work platforms where 10-20% is the norm. Proposed new federal legislation, the Empowering App-Based Workers Act, would return the take rate to a much more reasonable 25% level. But with Congress unlikely to act, states and cities should step in to cap these exorbitant fees. Colorado has tried to do this in recent years, but a huge lobbying push by big tech and the app industry has stymied those efforts. More cities and states should adopt such common sense caps to protect drivers and passengers against these predatory practices and return some of Uber’s windfall profits to local economies.
For restaurant delivery apps like DoorDash and UberEats the business model is similar. These platforms charge layer upon layer of fees to restaurants and customers that cumulatively can increase net meal prices by 80% or more once tips are factored in. Restaurants—many of them small, family-owned businesses—can’t effectively negotiate with these tech behemoths and as a practical matter need to use these platforms to compete for delivery business. At the same time, Uber and DoorDash are often paying the workers actually delivering the food subminimum wages—except in the few cities that have adopted minimum wages for delivery workers.
In response, during the pandemic, many cities capped restaurant delivery fees at 15% to prevent price-gouging—but most of those limits were later allowed to sunset. Seattle, New York City, and Jersey City have continued to cap delivery fees at 15% (although New York City allows the apps to charge a fee as high as 43% for restaurants that opt for “enhanced” marketing services).
These outrageous fees are driving down pay for workers, jacking up costs for consumers and small businesses, and sucking money out of local economies. The solution is simple: bring the fees back to where they were a few years ago by capping them at 20% or so, and guarantee the workers a minimum percentage of rideshare fares or delivery fees. By cracking down on profiteering by these giant corporations, we can protect consumers and small businesses against unfair fees while ensuring that the largest share of the fee goes to the workers.
