[inkaudio]

This is a regulatory response to Silicon Valley’s implementation of predatory pricing.

Let me explain:

Predatory pricing is defined as “the pricing of goods or services at such a low level that other suppliers cannot compete and are forced to leave the market.”

For silicon valley startups like Doordash and Grubhub this is accomplished by acquiring customers at a significant loss in ways that may often seem idiotic.

example: Doordash and Pizza Arbitrage https://news.ycombinator.com/item?id=23216852

The End game is to be the dominant food ordering platform in any given town where you get to dictate rates like 25%.

Since predatory pricing is illegal, this response is justified. However, it would be better if regulators enforce predatory pricing rules to begin with, which they rarely ever do.

for more info on predatory pricing rules in America see: https://www.ftc.gov/tips-advice/competition-guidance/guide-a...

[andrewla]

The problem is that this response is in the wrong direction. By forcing prices lower, we guarantee that only over-capitalized predatory businesses can compete in the space.

The problem is that consumer advocacy and anti-monopoly are practically the opposite thing. The end result of government action here should be short-term higher prices to the consumer, that reflect the actual cost of operations, rather than lower prices to the consumer (i.e. "free delivery") that is achieved by pricing at a loss to drive out competitors.

[dehrmann]

> we guarantee that only over-capitalized predatory businesses can compete in the space.

Assuming you can't make money at 10%, why would even a well-capitalized company that's OK with having a loss leader enter that market? The Uber strategy has been to enter a market fast, drive competitors out (possibly taking a loss), then (and looking at their earnings, this never happened, probably because there's a competitor in most of their markets) raise prices and finally turn a profit. If you can never turn a profit, why would you enter the market?

[nathanvanfleet]

Isn't the 10% cap making the end game of monopoly and higher prices impossible though?

[imtringued]

I'm just repeating what another comment said. The 10% cap doesn't include the delivery fee. It's about the price of the food. Delivery services can't charge more than $55 for $50 worth of food but they can still charge $10 for the delivery if that is what it costs.

[raz32dust]

> "consumer advocacy and anti-monopoly are practically the opposite thing."

Only true in the short term. Long term, monopoly prevents competition and is bad for consumers.

[scarface74]

They aren’t forcing prices lower. The companies are free to charge a higher delivery fee.

[waheoo]

You realise free shipping on ebay and amazon is.. anything but free right?

[mostlyghostly]

I'm struggling to call this predatory pricing when most of the food delivery app industry is unprofitable.

The correct industry action: push through higher pricing for the end users, share gains with drivers and restaurants to get to a sustainable business model, and accept the resulting decline in unit volume. (which also means fewer drivers will have jobs, so there's a human cost here as well)

It's easy to tell "corporations" to just suck it up, but you're dealing with a pure variable cost business here. If you make it unprofitable to serve a particular geography, they'll just exit the market. That only consolidates future market power in the surviving businesses....

[creato]

"Predatory" refers to competing businesses, not customers. The fact that the industry is unprofitable is the main indication that the pricing is predatory.

It's unclear to me if this industry would exist at all if it were profitable. There's a minimum volume needed to make the industry viable, once you fall below some (quite high) density of people ordering food delivery, it doesn't work.

[MisterTea]

> The End game is to be the dominant food ordering platform in any given town where you get to dictate rates like 25%.

You fight back by calling your order in and having them deliver it or pick it up yourself. I do this 99%* of the time as I refuse to pay a web server $8+ order+delivery fee for a meal that costs the same. It's absurd to think that people are so lazy that they cant pick up a phone or walk a few blocks/cycle/drive to get their meal.

*save for the rare late night drunk+high AF Dominoes orders.

[cortesoft]

I really hate this sort of argument... that people who use the newer, more convenient, technology are just lazy and should keep using the old way of doing things.

Why stop at delivery apps? Why are lazy people driving cars instead of just riding horses? Why are you ordering things online instead of just going to the store? Why are you farming using that tractor instead of a horse drawn plow?

Small conveniences add up. I don't want to live in a world where we aren't allowed to make things slightly easier.

[a_c_s]

Many of these platforms charge a fee for phone calls to the restaurant too.

Platforms like Seamless go so far as to set up websites for restaurants (that often have better SEO than the restaurant's original website), so the phone number listed routes through Seamless, helping to ensure they get their cut of any order.

[andrewla]

"You fight back by calling your order in" -- if they are offering free delivery through an app, all you are doing is paying inflated prices to subsidize their delivery customers. If they are not offering you an explicit called-in or picked-up discount, you're not really helping anyone except all those people using the app.

[elliekelly]

Sometimes it’s really hard to do this though. I recently wanted to order from a sushi place and I couldn’t find the paper menu with their number so I searched DDG. The first three or four things I clicked on weren’t the direct website of the restaurant. And only one was an ad.

I get that for some of these small local restaurant owners the margins are tight and I’ll do my best to make sure my money goes directly to them and not GrubHub/Yelp/Uber but I also understand that most of these places aren’t run by front-end developers and SEO experts. I’m not sure what the answer is but I also don’t think it’s always quite as simple as you’re making it out to be.

[deelowe]

In my experience, most restaurant staff get super upset about this -- especially if you ask them to bring your order out. Restaurant owners need to be more clear with their staff about needing to support this.

[briandear]

> It's absurd to think that people are so lazy that they cant pick up a phone or walk a few blocks/cycle/drive to get their meal.

You don’t have kids. Calling me lazy because I don’t have time to load up for small children in the car to drive a few miles then have to wait 0-25 minutes — potentially having to get out of the car and unloading said four kids to pick up the food, then reloading them to return home. Such an assumption that I am “lazy” is just bullshit and represents a failed understanding of a good portion of the market. We aren’t all childless adults sitting around smoking pot playing XBox waiting around for a key lime pie to be delivered. (Not saying you are, but that people who value their time more than the delivery costs are “lazy” is exactly the point you are making.)

I am happy to pay 25% for the time I am saving. It’s the same reason I don’t wash my own car: sure I could do it, but I have more valuable uses for my limited time.

[throw2346785]

>For silicon valley startups like Doordash and Grubhub

Ah, yes, Grubhub, the Silicon Valley startup that was founded in Chicago, is headquartered in Chicago, and has been a public company for 6 years.

[bmmayer1]

Isn't this a price cap, to prevent prices from getting too high? What does that do to protect against prices that are too low?

[willcipriano]

If prices are only legally allowed to rise so far it will be harder to find investors willing to throw money in the "make prices low to grab market share fire" as the highest possible rate in now 10% regardless of market share.

[amelius]

I think this has little to do with predatory pricing, but more with abuse of power. This power has been obtained in an unfair way, by collecting money from investors.

[dang]

Would you please stop posting flamebait and/or unsubstantive comments to HN? You've been doing it repeatedly, including in this thread, and it's not what HN is for.

If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.

[DanBC]

> GET OFF YOUR ASS AND GO GET YOUR OWN FOOD.

A gentle reminder that people with disabilities exist and they benefit from food delivery services.

[lotsofpulp]

Yes, this is a completely unnecessary law. Restaurant phone numbers are seconds away using the same device used to order from these apps, and a phone call is free.

Absolutely no reason a restaurant can’t recoup extra costs by charging the app users more or simply refusing to do business with the app.

[amyjess]

> GET OFF YOUR ASS AND GO GET YOUR OWN FOOD

That's really something to say to people who are 100% quarantined during a pandemic.

[raverbashing]

The 25% delivery fee is fine as long as it's explicitly charged to the consumer and not charged as commission from the "restaurant cost"

I have no qualms if I order on the system and it shows, let's say:

- Pizza: $15

- Delivery fee: $9

And the entirety of the $15 goes to the restaurant

But that doesn't seem to be happening

[hartator]

> GET OFF YOUR ASS AND GO GET YOUR OWN FOOD

Nah, I’ll just ask the police to do something about it.