Food delivery companies turn to K Street as industry scrutinized

Food delivery companies turn to K Street as industry scrutinized
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Food delivery companies that have seen revenues soar during the lockdowns caused by the coronavirus are turning to K Street as their business models and treatment of employees come under deeper scrutiny and attack from some quarters.

Companies like DoorDash and Instacart in recent weeks have hired lobbying firms to handle labor, food and consumer policy issues. Postmates, another major player in the growing sector, is on track to boost its already robust spending on lobbying.

The industry has faced some criticism from Democrats, unions and the public at large for the pay and treatment of its workers during the pandemic, when many have put themselves on the front lines by coming into contact with dozens of people each day at grocery stores and while making deliveries.

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“At the end of the day, these services rely on the trust of the company. If they are not safe with respect to the containment of the virus, they will lose the public,” said Stefanos Zenios, a professor at Stanford Graduate School of Business.

Instacart is one of the companies that has been under the microscope these past two months for what critics and workers say is a lack of protections in highly contagious environments.

Workers protested last week to demand better pay and access to paid sick leave, as well as greater access to disinfectant wipes and hand sanitizer. In February, some of Instacart’s workers unionized, strengthening their hand for future negotiations with the company.

Those developments came as the company reported its highest demand ever, with year-over-year increases in order volumes as high as 500 percent.

The company told The Hill that as of last month it started implementing in-app wellness checks, safety supply kits, new health guidelines, shopper bonuses, new sick leave policies and pay for shoppers diagnosed with the coronavirus or quarantined due to contact with the virus.

Instacart has had lobbying firm Mehlman Castagnetti Rosen & Thomas on a $40,000 a year retainer; 2019 was its first year with federal lobbyists.

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Instacart workers are contracted and not full-time employees, which puts them in the same category as drivers for Uber and Lyft.

Other top companies are also beefing up their K Street spending.

DoorDash, the leader in food delivery with a 35 percent market share, hired its first federal lobbyists last month. The company retained Cassidy & Associates to work on issues related to labor and unemployment, technology, consumer issues, food and restaurant, tax, and the gig economy.

Postmates first hired lobbying shop Franklin Square Group in 2017 and has spent $30,000 on lobbying so far this year.

Others, meanwhile, are looking to consolidate.

Uber is reportedly seeking to acquire GrubHub, a public company that has no registered federal lobbyists. Uber Eats has massive representation in D.C. through Uber, which has spent $630,000 on lobbying so far in 2020 and spent over $2.3 million in 2019.

Uber Eats grew 54 percent in the first three months of 2020, while Uber overall has suffered significant losses during the pandemic.

The coronavirus has hit the gig economy particularly hard, prompting Democrats to urge the Labor Department to clarify for guidance states that are struggling to provide expanded unemployment benefits to workers.

Democrats are also calling for increased protections for gig workers, while Republicans have been working to expand liability protections for employers as states gradually reopen.

At the state level, the pandemic has also increased the focus on fees charged by delivery services.

GrubHub, DoorDash, Postmates and Uber Eats were sued in New York last month over their customer fees. But fees on restaurants are also creating backlash, prompting San Francisco and Seattle to put caps in place.

“While some delivery services have waived fees on the customer side, delivery services continue to charge restaurants a commission. These fees typically range from 10 percent to 30 percent and can represent a significant portion of a restaurant’s revenue, especially at a time when the vast majority of sales are for delivery. This commission fee can wipe out a restaurant’s entire margin,” San Francisco Mayor London Breed (D) said last month.

The National Restaurant Association has called on states to cap delivery fees for restaurants on third party delivery services.

Gregory McNeal, a professor of law and public policy at Pepperdine University, said the issue will require increased state and federal lobbying by food delivery services.

“The restaurant industry has had fee caps on their lobbying agenda for years. They’ve swiftly taken advantage of the pandemic to implement their agenda while the delivery companies were caught flat-footed, and now they are playing catch up,” he said. “For the delivery companies to compete, they are going to need a full nationwide campaign that extends beyond just Washington, D.C. This is a fight that will take place in statehouses, and in city council meetings, and they will need allies.”

But the rise of delivery services doesn’t need to be at the expense of restaurants, said Arun Sundararajan, professor at New York University Stern School of Business.

“A number of restaurants are going out of business. If you think about things through that lens, the restaurants that survive are likely to be the ones who were either doing a lot of deliveries through these platforms or turned to this channel and used it well,” he said.

“The restaurants we’re going to be left with post lockdown are going to be biased very heavily in favor of the ones that had an active digital channel.”