New York City Instacart customers are now facing a new charge at checkout: a “regulatory response fee.” The fee, which reached $5.99 on one recent order, is a direct result of the city’s new minimum wage rules for grocery delivery workers, according to Instacart.
Delivery Fee Fight
The addition of this fee marks a continuing conflict between delivery apps and the New York City Council. City leaders have been working to establish rules around pay and tipping to protect workers in the gig economy. Delivery companies, however, contend that these regulations increase costs for consumers and could negatively impact both small businesses and the workers themselves.
Instacart’s new fee is an example of “drip pricing,” according to Vicki Morwitz, a professor of business and marketing at Columbia Business School. Critics have labeled these added fees as “junk fees,” arguing they obscure the true cost of goods from consumers. Morwitz explained that customers are more likely to complete a purchase, even with hidden fees, once they’ve already selected their items.
The new regulations, which went into effect Monday, require grocery delivery apps to pay workers a minimum of $21.44 an hour, excluding tips. Apps must also offer customers the option to tip, with a default rate of at least 10% preselected at checkout. The city previously accused Uber and DoorDash of costing workers over $550 million by delaying the presentation of the tipping option.
Instacart and other delivery services attempted to block the new laws in court, but judges rejected their requests last week. DoorDash already charges a $1.99 “NYC Regulatory Response Fee,” and Uber has also adjusted its pricing to account for the new regulations. Instacart stated the new rules were the result of a “rushed, flawed and politicized process.”
Policymakers are increasingly focused on addressing these types of pricing structures. The Federal Trade Commission, under the Biden administration, recently passed a rule requiring upfront fee disclosure for tickets, hotels, and rental platforms. New York City Mayor Zohran Mamdani has also announced a crackdown on “junk fees” in the hotel industry.
Frequently Asked Questions
What is the “regulatory response fee”?
The “regulatory response fee” is a new charge being added to Instacart orders in New York City. It is a direct response to the city’s new minimum wage rules for grocery delivery workers.
How much is the fee?
The fee varies, but was $5.99 on an order placed this week, according to reporting. DoorDash charges a similar fee of $1.99.
What are the new regulations for delivery workers?
The new regulations require grocery delivery apps to pay workers at least $21.44 an hour, not including tips, and to present customers with a default 10% tip option at checkout.
As the Department of Consumer and Worker Protection investigates Instacart’s new fee, it remains to be seen how delivery apps will continue to adapt to the changing regulatory landscape in New York City, and whether other companies will follow suit with similar fee structures.
