Saturday, April 25, 2020

Frank Newman: Straight Talk - Uber Eats

Uber Eats describes itself as a food delivery platform, but its more than that. It’s also a sales platform and that's the attraction for food outlets - it's a source of new business that they would not otherwise gain.

Of course it comes at a cost: between 30% and 35% of the sale value. That cost has come under attack from the Restaurant Association NZ.

In a press release, it's Chief Executive Officer, Marisa Bidois, called on the government to "enforce a cap on commission rates for third party delivery apps." Their headline refers to Uber who they said was "taking the shirt off the industry’s back".

Strong words and a big call to ask the government to regulate pricing in a competitive industry. The press release mentioned 15% as a commission cap. I asked Ms Bidois if she believed in the free market, and whether she would be comfortable with the government regulating restaurant pricing generally.

She replied as follows:

"Thank you for your response. I generally do have a huge amount of faith in the free market but we are in unusual times and because of this I do think that it could be helpful to have some temporary  intervention. Ngā mihi nui."

I agree these are unusual times, but disagree the appropriate response is to ask the government to regulate Uber's pricing.  

Fortunately the Prime Minister rejected the call and instead encouraged Kiwis to eat local and use restaurants that do their own deliveries.  That of course is just a patsy response designed to kick the issue for touch.

Restaurants can make their own choice, and will decide whether to sign up to Uber Eats or not. For the benefit of the Restaurant Association, I need to say that that's how the market place works. I would have a different view is Uber Eats was a monopoly, but it's not. It has opened up a new market and deserves credit for doing it well. It's now up to others to rise to the challenge and do it as well if not better.

The Restaurant Association needs to be very careful about asking the government to regulate pricing within their industry. There's no shortage of politicians in Parliament who would like a reason to impose their world view on the hospitality industry.

Frank Newman, a writer and investment analyst, is a former local body councillor.

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