New Bill Increases Third-Party Delivery App Transparency in Texas

A new Texas bill that protects restaurants from predatory practices by third-party delivery services went into effect as of January 1. At the same time, the SB 911 bill prohibits cities and counties from creating regulations that would interfere with the agreements between restaurants and the services. Texas Gov. Greg Abbott signed the bill back in June 2021.

SB 911 was introduced in March 2021 as a way to provide transparency protections to consumers and restaurants as the industry continues to recover from the COVID-19 pandemic. The new legislation provides the following protections to restaurants:

• Third-party delivery services cannot use a restaurant’s trademarks in a misleading way to suggest the restaurant sponsors or endorses the service
• Third-party delivery services cannot charge a restaurant any fees unless they are agreed to in writing
• If a restaurant requests to be removed from the listings of the third-party delivery service, it must be removed within 10 days of receiving a removal request
• Third-party delivery services must provide consumers with a clearly identified way to express concerns with an order directly to the delivery service.

Under the new law, if a third-party delivery service violates these terms, the restaurant can sue for damages.

On the other hand, cities and counties cannot make regulations that would interfere with contracts between third-party delivery services and restaurants — essentially limiting city and county governments from introducing stronger rules locally such as fee caps.

The bill is supported by both the Texas Restaurant Association (TRA) and third-party delivery apps like DoorDash, Favor, Grubhub, and Uber Eats.

The COVID-19 pandemic has been a boon for third-party delivery apps, as people avoided or were prevented from visiting restaurants due to safety concerns. However, the apps charge high fees for their services, something that many restaurants described as a predatory practice when small businesses were hurting the most. As it stands, restaurants will have to wait a while to see any benefit from the new transparency rules.

Legislation regulating third-party apps has gained momentum during the pandemic. California passed a similar law in January 2021, and New York City and Washington state have laws capping delivery fees (although DoorDash is suing New York City over a specific law requiring the company to share its data with restaurants). Texas had a similar bill to limit fees that never made it out of committee.

This legislation aims to prevent recent situations where restaurants are listed on third-party delivery services without their consent or knowledge — which was actually part of the services’ strategy (Grubhub’s spokesperson told Eater in 2019, “We think when we add restaurants they’ll see orders, and see the benefit of the Grubhub platform.”) In one particularly egregious case, Michelin-starred restaurant Kin Khao in San Francisco was listed on GrubHub with an entirely different menu made in a ghost kitchen — which the chef discovered when a customer called the restaurant to ask about his order.

• Texas Senate Bill 911 [LegiScan]