Lee’s AB 1444 to Protect Small Businesses and Enhance Consumer Protections Heads to Governor

For immediate release:

AB 1444 by Assemblymember Alex Lee (D-San José) to protect small businesses and enhance consumer protections is headed to the Governor’s desk for signature. Currently, listing websites such as Yelp, and third-party platforms such as Grubhub, are not informing consumers when calls are being tracked or rerouted in order for these companies to charge a referral commission to the restaurant. AB 1444 provides consumers more transparency on who they are doing business with by requiring a disclosure if a call is going to be rerouted in order to protect struggling small businesses from additional charges.

As small businesses continue in their recovery from the pandemic, many are barely staying afloat with their narrow margins becoming increasingly smaller due to high fees from third-party ordering apps. When calls are rerouted through these third parties, customers might not be aware that when they’re calling their local restaurant to place an order, it may actually be costing the restaurant money. The disclosure allows consumers to have the information to make conscientious decisions when placing an order.

“According to the California Asian Pacific Chamber of Commerce, 41% of phone orders in the State of California that come from Grubhub come from Asian restaurants,” said Lee. “As Asian restaurants are even more reliant on phone orders and have been disproportionately impacted by the pandemic due to the xenophobic narrative surrounding COVID-19, these disclosures will have an important impact on consumer behavior to protect our local small businesses from these inadvertent charges.”

AB 1444:

  • Prohibits food delivery platforms from charging restaurants for routed calls that do not result in a paid order.
  • Requires that listing services provide clear and accurate information about contacting a restaurant so that customers know how to connect with the business directly and small businesses are able to interact with their customers without a third-party tech company rerouting or otherwise monitoring the call-in order to collect a referral commission.
  • Requires that listing websites will clearly disclose if an order placed through a telephone number or other interface on their internet website or application could result in a commission or fee paid to a party other than the restaurant, and the disclosure will also identify the party that the commission or fee will be paid to.
  • Requires that all future contracts between a food facility and a food delivery platform include clear information of all possible charges or fees that may be incurred onto restaurants.

This proposal was sponsored by the Silicon Valley Chamber Coalition, which comprises 18 Chambers of Commerce in and around Silicon Valley, representing the interests of thousands of businesses and tens of thousands of employees. In addition, many other business organizations such as the Small Business Majority, California Restaurant Association, and other Chambers have supported the proposal – along with consumer rights organizations such as the Consumer Attorneys of California and Consumer Federation of California.

Lee also jointly authored AB 286 which would require delivery platforms to disclose to customers and restaurants an itemized breakdown of fees charged in transactions and allow restaurants to set the prices of food and drinks sold through the applications.