Tst

Prompt

How would supporters of the Delivery Protection Act counter the arguments made in the article provided below? New York City Council is weighing Intro 518, the Delivery Protection Act. The bill would ban last-mile delivery services from contracting with Delivery Service Partner (DSP) networks, require direct employment of drivers dropping packages in the city, put last-mile warehouses on a city license, and add safety and retention provisions. When a city raises the cost of delivering, someone has to pay for it and usually it’s the consumer. The remedy this bill chooses comes with a price tag the sponsors have not fully accounted for, and New Yorkers are the ones who would end up paying most of it. Additionally, New York City has already run a version of this experiment on a different platform – food delivery. Costs do not vanish, they relocate When a city mandate raises the cost of providing a service, that cost shows up somewhere. The only question is where. This is the standard tax incidence framework that any introductory public economics textbook works through. In last-mile delivery, there are basically four channels of adjustment available to a platform: 1. Raise prices to consumers, through per-order fees, shipping minimums, or the price of subscription itself. 2. Slow the service, through longer delivery windows or by dropping same-day and two-hour tiers. 3. Cut the platform’s footprint in the city, by relocating operations elsewhere. 4. Absorb the cost into the company’s margin. Three of those four channels land on consumers. The fourth, absorbing into margin, is the least likely outcome for a publicly traded company with a fiduciary duty to its shareholders. Which leaves the question of how much of the cost gets passed through, and that is where the economics get interesting. The standard tax incidence framework says the answer depends on demand elasticity. When demand is inelastic, meaning consumers don’t change their behavior much in response to a price change, firms can pass costs through more easily. Customers absorb the bump because they do not have a great substitute. This is how policy translates into higher prices for consumers. Consider the case of Amazon: a few signals point to Amazon’s NYC delivery demand being fairly inelastic. Prime renewal rates run consistently above 90% in U.S. surveys, which is unusual for any consumer subscription and almost unheard of at Prime’s scale. Prime members in dense urban markets order more frequently than the average member and rely more heavily on the speed tiers, which means the average NYC Prime user has more to lose from cancelling than a suburban or rural one. And the alternatives to Amazon and similar companies that utilize DSPs in NYC are weaker than they look on paper. Roughly 45% of NYC households do not own a car, the highest rate of any large U.S. city, and the city has fewer big-box retail square feet per capita than the U.S. average. The time cost of substituting in-person shopping for delivery is high in a way it just isn’t in most of the country. Add it up and you have customers who are used to delivery, used to return habits, and have speed expectations. That’s exactly the demand profile where a firm can pass costs through cleanly. A small per-order fee or a regional Prime price bump isn’t going to push many NYC Prime members to start driving to a Target. That’s the textbook case for cost pass-through. None of this is a partisan claim. It’s the same framework you’d use to analyze a soda tax or a tariff. If that framework sounds abstract, New York City has already run the experiment – on a different platform. There is no such thing as a free pay standard The closest precedent for what Intro 518 would do is NYC’s minimum pay standard for app-based restaurant delivery, which the Department of Consumer and Worker Protection (DCWP) began enforcing in December 2023. The structure is different from Intro 518 in important ways. The minimum pay standard set a wage floor for couriers working through Uber Eats, DoorDash, Grubhub, and similar platforms. Intro 518 goes further by reclassifying drivers as direct employees, but both rules raise the cost of running a delivery operation in NYC, and the platforms respond to that the same way. Here’s what happened to consumers after the minimum pay standard took effect. The platforms did not hide what would happen. In court filings challenging the rule, Uber estimated that the policy “would cause average consumer fees to more than double from current levels”. The DCWP’s own quarterly data tracks what happened next, and the numbers line up almost exactly with what Uber had described to the court. The average consumer fee on a NYC restaurant delivery rose from $4.05 per order in Q1 2022 to $6.73 in Q1 2024, a 66% increase. The bulk of that jump came in a single quarter, the first full quarter the rule was in effect. The average fee went from $5.20 in Q4 2023 to $6.73 in Q1 2024, a 29% increase in three months. By Q1 2025 the average fee was $6.97 per delivery, well above its pre-rule trajectory. The aggregate numbers are the same story at the city level. Total quarterly consumer fees paid to NYC restaurant delivery platforms rose from $10.2 million in Q1 2022 to $22.5 million in Q1 2025, more than doubling over the period, with most of the increase concentrated in the quarters immediately after the rule took effect. The point for this post is simple: when a platform faces a new cost, it adjusts every dial it controls, and consumer fees are usually the most adjustable dial in the panel. The customers who lean hardest on delivery – often because they have less flexibility (no car, long work hours, caregiving responsibilities, mobility limitations) – tend to absorb more of that pass-through than the average. The customers who can substitute most easily, by walking to a restaurant or a grocery store, absorb less. That’s how cost pass-through usually works in practice – the customers with the fewest alternatives end up carrying the most. Then the city’s delivery pay rule expanded to grocery delivery in January 2026, and the same playbook ran again immediately. Instacart added a $5.99 per-order “regulatory fee” on NYC orders. It’s a NYC-only surcharge on a national service, line-itemed at checkout, with the regulatory cause stated right in the label. There is no clearer pass-through mechanism than a fee literally named for the regulation that triggered it. That’s the relevant precedent for what would happen under Intro 518. Two times now, when NYC has raised the cost of running a delivery platform in the city, consumers have seen the difference at checkout almost immediately. The pattern is consistent across two different delivery verticals and several platforms. Expecting different behavior under this policy would require a story about why companies would absorb a city-level cost into margin instead of passing it through. How an Amazon Prime checkout could absorb a city-level cost While other companies are likely included in the bill’s scope, much of the coverage focuses on Amazon. Amazon’s economics differ from food and grocery delivery in one important way. Shipping costs at Amazon are usually folded into the Prime membership price rather than itemized at checkout. That makes the pass-through less visible than a $5.99 line item, but it doesn’t make it less real. The consumer feels it. The line just isn’t labeled. There are at least four likely pass-through mechanisms Amazon could use in NYC, and none of them require new infrastructure for the company. A NYC-specific per-order handling fee. This is the simplest mechanism, and Instacart already proved it works for the company, the regulator, and the courts. Amazon could itemize a delivery surcharge on NYC orders, label it whatever it wants, and the rest of the country wouldn’t see it. A regional Prime price adjustment. Amazon has historically priced Prime nationally, but a city-level cost pressure could push toward zip-code-based pricing for the membership itself. Tighter free-shipping thresholds for NYC addresses. The order minimum to qualify for free shipping climbs, so customers either consolidate orders, pay a per-shipment fee, or pad their cart to hit the threshold. Each of those is a real cost, even when the dollar figure isn’t on the receipt. Elimination of same-day or two-hour delivery tiers in the city. This one shows up as a service cut rather than a price hike, but it’s the same economic event. The consumer either pays more for speed, waits longer, or doesn’t get the service at all. Amazon has already said something close to this, on the record. In written testimony to the City Council on Intro 518, Amazon warned that it would “consider relocating delivery operations” out of the city. That’s one of the four channels named explicitly in a single document. Each of those mechanisms hits a different segment of NYC shoppers, which is part of why this matters as a distributional question and not just an average price question. Per-order fees hit small-basket shoppers most. A flat fee is a much bigger share of a $20 order than a $200 one, and the customers who buy in smaller baskets, who are likely disproportionately lower income, end up paying the fee on a larger share of every dollar they spend on Amazon. Prime price adjustments hit a different group, the Prime-loyal shoppers who use the service most and have the least flexibility to walk away. Threshold changes land on the same small-basket shoppers as the per-order fee, just through a different mechanism, by forcing them to pay shipping that used to be free, pad the cart with things they don’t need immediately to clear the new threshold, or go without. And tier eliminations hit anyone relying on speed: parents of small kids, caregivers, people with disabilities, anyone managing prescriptions or dietary needs, anyone who can’t easily get to a store. The question isn’t whether, it’s where If Intro 518 passes in its current form, who will actually pay? The economic framework, NYC’s two recent food and grocery delivery experiments, and Amazon’s own testimony all point in the same direction. Consumers would pay, through some mix of higher prices, slower service, or fewer services. The exact mix is up to the companies. The fact that consumers absorb most of it isn’t. Whatever you think about driver pay or platform accountability, the cost of this bill is not going to sit inside companies’ margins. It’s going to sit inside a household budget in Queens.