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Uber Eats contracts found to be unfair

Editorial Staff

The growth of courier services, dedicated to food delivery, has in some markets become dominated by companies that began with on-line car and driver hire services, often mis-named "ride hailing." Their power in the market has enabled them to define the terms that they demand in contracts with food providers (often called, but often not, "restaurants"). At the pointy-end of such services is, in a significant number of markets, Uber, a company which has, since inception, displayed a disregard for local laws in countries which it has entered. It has also been widely criticised for the terms it imposes on the drivers and motorcycle riders it engages. As this case shows, it has also displayed a willingness to impose unfair contract terms on those it does business with.

Uber Eats dominates the food delivery service in Australia. Like several other companies that broker services between passengers and car drivers, it provides a range of services including a service for ordering food to be prepared by third-party food suppliers and delivered by courier contracted to Uber.

Uber takes a hefty slice of the pie, so to speak, from the food providers, the range of which covers everything from burger bars and sandwich makers to some of, for example, Melbourne's most expensive (they say "exclusive") restaurants. The service has become so important to the take-away sector that some restaurants have set up "grey" kitchens where food for on-line ordering. These are in secondary locations, often industrial estates, where there is little or no traffic out of hours and rents are far below those of the city-centre primary location. The effect on the delivery drivers is that their distances from such secondary locations to the (usually) urban customers is further. The effect on the food is that it is transit for longer. Longer transit times inevitably translate to the food being in takeaway containers for longer than is ideal and, if e.g. cooked food and salads are not properly separated, a deterioration in quality. There is, also, the risk of the food being damaged by the actions of the driver or rider.

Uber includes in its contracts with food providers that complaints by customers fall on the food provider. Uber reserved the right to unilaterally determine the validity or otherwise of customers' complaints and to charge, to the food provider, the full cost of the order. Complaints range from cold food to poor quality food and missing or incorrect items. Uber does not provide for the circumstances where a driver or rider may have been at fault nor did it provide for the circumstances where the customer may have given incorrect information. The end result is that, if Uber takes, say, 40% of the order cost, then backcharges the whole order cost to the food provider, not only has the provider suffered to cost of the food, preparation and packing and packaging, but also pays a 40% penalty.

The issue came before Australia's Consumer and Competition Commission which reviewed Uber Eats' contracts with food providers. Two important questions arose and they have both industry-wide and global implications.

First was whether Uber was using its market position to impose unfair contract terms on food providers which are, often, far smaller businesses.
The second was whether the deliver service was in fact a courier (they use the term "logistics") service.

In relation to the unfair contract terms point, "Uber Eats’ contract terms give it the right to refund consumers and deduct that amount from the restaurant even when the problem with the meal may not have been the fault of the restaurant." This has been, on the face of it, resolved but the manner of resolution has demonstrated a weakness in laws, not only in Australia, relating to such incidents.

“Following our investigation, Uber Eats has committed to changing its contract terms that we believe are unfair, because they make restaurants responsible and financially liable for elements outside of their control. We consider these terms to be unfair because they appear to cause a significant imbalance between restaurants and Uber Eats; the terms were not reasonably necessary to protect Uber Eats and could cause detriment to restaurants.” ACCC Chairman Rod Sims said.

In a statement, the ACCC said "Uber Eats has agreed to amend these terms, to clarify that restaurants will only be responsible for matters within their control such as incorrect food items or incorrect and missing orders. Under the amended contracts, restaurants will also be able to dispute responsibility for any refunds to customers and Uber Eats will reasonably consider these disputes."

But not yet. Uber has been allowed a period of grace in which to change its terms - until December this year. In the meantime, it will not, it says, enforce the terms that ACCC considers unfair. This, however, may mean nothing more than giving the food providers the opportunity to present their side of the story. Uber will still remain the sole arbiter and it will still have a conflict of interest because its success is largely social media driven and bad reviews do harm to its own business. It may, of course, mean that in the event that the food provider can evidence that the order was correct when it left, that it was properly packed and that it was available for pick up at the scheduled time, Uber itself refunds the customer.

Closed circuit TV at the preparation point will become an essential tool in the armoury of food providers.

On the second point, the ACCC "was also investigating whether a contract clause which referred to Uber Eats not providing logistics services was misleading. The ACCC was concerned by these terms given Uber Eats’ role in determining the pool of drivers available to restaurants, their payments, and providing facilities such as the consumer’s address, map services and GPS tracking to assist the driver in delivering meals. Uber Eats also agreed to remedy this clause." Rod Sims said "they clearly do." That clause will be removed from its contracts.

The ACCC is seeking an amendment to unfair contract terms law which would empower it to impose penalties, including financial penalties, on companies that abuse a market position (even though it is not, in legal terms, a "dominant market position"). It has had some support from the Australian Federal Government. Currently, as in most common law countries, the remedy is that a Court may declare the provision unenforceable but no penalty would be applied.

Whether the extension of the penalty system to unfair contract terms, which would bring it into that grey area of civil penalties which falls between common law and criminal law, is a good idea is open to question.

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