FTC Issues Call for Comments on Food and Grocery Delivery Rule

On April 16, the Federal Trade Commission (FTC) published in the Federal Register an Advance Notice of Proposed Rulemaking (ANPRM) on unfair and deceptive fee practices in online food and grocery delivery services. In other words, this is the first step toward the FTC issuing a rule regulating fees for online services delivering food and groceries. The scope of what “online food and grocery delivery” encompasses is not yet defined, and many of the questions cover this market and the roles of different companies within it. The FTC is accepting comments on the ANPRM until May 18.

The ANPRM covers why a rule may be needed and the questions on which the FTC is seeking comment. Notably, this is not a Notice of Proposed Rulemaking (NPRM), which would include the proposed rule. That will come at a later stage, after the FTC considers comments on the ANPRM. There will be a separate opportunity for comments on the NPRM, and, after that point, the FTC would issue a final rule should it choose to proceed. Rulemaking takes time, and we are likely years away from a new rule coming into effect. But comments submitted now and after the NPRM are an important part of the process. The FTC will review them, and the comments can and likely will influence any final rule.

On why a rule is needed, the ANPRM points to the high cost of food delivery, its increased adoption by customers, and consumer confusion over what fees will apply. The FTC finds evidence that these problems exist in the FTC’s own actions related to tips for drivers and “free delivery”-type claims. The ANPRM also cites to state legislation and enforcement as well as class action cases on these same issues. Interestingly, the FTC acknowledges that it considered similar restrictions previously in the 2023 NPRM for the Junk Fee Rule, which was eventually limited to only apply to the live-event ticketing and short-term lodging industries.

On the actual request for comment, there are 65 questions, several of which have many subparts, but the FTC’s press release helpfully breaks it down into the following topics:

• Total Price. Do food delivery platforms clearly and conspicuously disclose the total price for food or grocery items ordered for local delivery or pickup?
• Fees and Charges. Do online food delivery platforms clearly and conspicuously disclose the existence, nature, purpose, refundability, or recipient of any fees, charges, or other costs for a delivery or pickup order?
• Variable or Contingent Fees. Do online food delivery platforms clearly and conspicuously disclose factors used to determine any fees, charges, or other costs that are variable or contingent on consumer selections, such as number or type of items bought or delivery location?
• Material Restrictions. Do online food delivery platforms clearly and conspicuously disclose whether fees, charges, or other costs are mandatory or optional, or any material restrictions, limitations, or restrictions that may result in additional charges or that may diminish the consumer’s use of the good or service?
• Price Differentials. Do online food delivery platforms clearly and conspicuously disclose whether the prices of items ordered are the same as, or different from, the prices of the same items offered in the store or restaurant?
• Personalized Pricing. Do online food delivery platforms clearly and conspicuously disclose whether the prices of items ordered are the same as, or different from, the prices of the same items offered to other consumers on the platform?
• Discounts or Promotions. Do online food delivery platforms clearly and conspicuously disclose material limitations, restrictions, or conditions on applicable discounts or promotions?
• Additional Payments. Do online food delivery platforms misrepresent that a consumer owes payments for any product or service that the consumer did not agree to buy?
• Unauthorized Billing. Do online food delivery platforms bill consumers for fees or charges, or for goods and services, without their express informed consent?

If your business provides online food or grocery delivery service, then you should read the full list of questions and consider whether you can provide facts to the FTC that would be relevant to this analysis. For many questions, the FTC is specifically looking for economic data that only industry can likely provide. For example, Question 22(b) asks, “What incremental costs do online food delivery platforms incur in complying with varying national, State, or local regulations, and to what extent are these costs incurred by or shared with food and grocery merchants or others (such as delivery workers)?”

Other questions are more expressly legal and provide a potential road map for the final rule. Based on the questions in the “Potential Rule Provisions and Other Potential Commission Action” section, the FTC is considering the following frameworks for the rule:

• A requirement to disclose the total price if advertising a combined price for goods and services (e.g., get this product and have it delivered for a certain price)
• A requirement to disclose the total price if advertising a price for delivery services
• Implementing requirements such as the above but excluding delivery fees
• A requirement that the total price advertised be clear and conspicuous or the more onerous requirement that the total price be more prominent than any other pricing information
• Potential exemptions or different treatment for contingent or variable fees

This proposed regulation reflects an increase in rulemaking under the Trump administration and Chair Andrew Ferguson. In many ways, this can be seen as a reaction to the previous administration and the policies of then-Chair Lina Khan. Chair Khan’s FTC was criticized for bringing novel cases that would create new law through enforcement. This proposed rule demonstrates the current FTC’s intent to create law through regulation. It also reflects the new reality for the FTC following the AMG Capital decision. That decision removed the FTC’s ability to go to federal court and receive monetary damages for violations of the FTC Act’s general prohibition on unfair and deceptive acts or practices. But with a rule in place, the FTC can seek civil penalties greater than $53,000 for each violation. The move to create a rule is a strong indicator the FTC will continue enforcement in this space.