Little things mean a lot. Just ask Visa and Mastercard, which has created a reliable billion-dollar worldwide industry by charging a few extra pennies with every transaction. So as you read this story about my anger over a rogue $2.50 fee, please keep that in mind. I don’t care about the pennies. I care about a large, dominant corporation sneaking its way into industries and raiding it for cash while tricking unsuspecting consumers along the way. This is classic Gotcha Capitalism. It’s why small fees are an irritant to you and me, but collectively, they signal big trouble for the economy.
I was feeling sick the other day and needed food on my way home, so I pulled up my mobile phone while riding on the DC metro to order Chinese takeout. I’m normally happy to walk in and order, and wait for a few minutes, but I needed to get to bed as soon as possible, so I wanted the food ready when I arrived.
Conveniently, Google maps sometimes displays an express ordering mechanism when you search for a restaurant. It’s a neat feature that works well, launched last year as a partnership with Postmates. And, I was delighted to see, it was clearly marked “NO FEE” when you pick the food up yourself, which I was going to do on my way home from the subway.
Here’s where things went off the rails. My order total was $18. My food was $14. Why was that, I wondered? My email confirmation from Postmates offered no hint — just a line that read “taxes and fees, $4.” As I sat on the subway, pondering this, I recalled the quickest flash of a screen that included the line “service fee: $2.50” as I clicked “order,” but now I couldn’t find that anywhere. I figured I would ask my restaurant when I arrived, or I’d get an itemized receipt after I picked up my food.
Neither route proved fruitful. The poor host at the restaurant handed me my bag of food and had no idea what I was talking about, which I’d expect. Local restaurants now see their front doors littered with tablets and other gadgets pinging away, keeping their kitchens busy. They have a vague idea that the people behind these gadgets are ripping them off, or at least profiting massively from their hard labor, but it’s hard to pin that down.
As the host and I struggled to communicate and overcome our language barrier, she informed me that I should never again order using this “triangle” — a service that makes the order go here, then there and then there, before it gets to her. “Just call!” she admonished me. She’s wise.
Meanwhile, as I put on my reporter’s hat to figure out what was going on, I fell into a Bermuda Triangle of customer service.
After I picked up my food, I got nothing. Not so much as a standard-looking receipt. Clicking on the “track order” link in the order confirmation email from Postmates revealed the same frustrating and vague “taxes and fees: $4.” I hunted around through the Postmates help center and eventually found a way to email the company. To its credit, I received a fairly prompt response. To its discredit, the response was gobblygook.
Let me annotate this email:
POSTMATES: “It has been noted that the said amount represents the merchant fee. Merchant fees are the amount charged by a merchant service to a customer for processing credit card transactions.
[That’s not true. The restaurant doesn’t charge $2.50 to use credit cards in any other circumstance. This fee had something to do with Postmates/Google.]
POSTMATES: “Meanwhile, you can see your order history by opening the Postmates app on the phone. Select Profile Icon in the top left and then Select Order History.”
[That’s not true. I don’t even have the Postmates app]
POSTMATES: When your order has been completed, Postmates automatically sends an email with the total amount that was paid with a link to View Order.
[Nope. No email arrived. Yes, I checked my junk folder.]
If you are counting at home, that’s 0 for 3.
I’d like to pause for a brief moment and talk about the economics of this situation. My little Chinese restaurant pays exorbitant rent to be in the neighborhood next to the subway. Employees there arrive at the crack of dawn, and work long days preparing delicious food with great care, overcoming massive hurdles like health department inspections along the way. The restaurant manager constantly scans suppliers, trying to save money ordering chicken, or broccoli, or rice. The owner pays for electricity. Someone, many years ago, risked their personal fortune just to open the place. And the place sells me a $14 dinner, I’ll hazard a guess that it makes — at best – $4 in profit. Add in real, long-term costs, and it’s probably closer to $2.50.
Then, I click on an app and someone makes another $2.50. (Who? I don’t know yet. We’ll get to that.] Just for writing some lines of code. Oh, and as Matt antitrust expert Matt Stoller would remind everyone, by exploiting a dominant market position. You see, when in a feverish haze on the subway I Googled my restaurant, Google got to display its ordering service first! Right atop the results. The start-up Postmates has no choice but to partner with Google in a situation like that. It has to get in on the action. And my restaurant better take that tablet and play along too, because otherwise, it’ll lose out to other eateries that do.
Back to my saga. I of course continued to try to get answers about my service fee. With each successive email from Postmates, I got a different response.
- The second email ignored my question but at least included a PDF of the receipt, which I could finally see that $2.50 service fee in black and white.
- The third email said, “The merchant fee is an extra fee provided by the merchant that is related to your order as well. I hope this provides clarity.” [It didn’t!]
- The fourth email said, ” I’m sorry to hear that you got charged for the merchant fee and I’m happy to look into this for you. I’m sorry we can’t refund this fee because it is set by the merchant for the items with additionals charges.” [I never asked for a refund, just an explanation.]
I’ve asked Google for an explanation, too. Nothing yet.
I *do* think it’s entirely possible that this $2.50 went to my restaurant, and not to Google or Postmates. I’m fine with that, though I’ll be sure not to use this service ever again. My suspicion of what happened is this: my local eatery has no good way to distinguish between Postmates pickup and delivery orders, so it just adds a merchant fee to any Postmates order. Good for them! But still, that should be abundantly clear and employees should know about it.
This still doesn’t solve my economics problem, however. The restaurant is doing this in an attempt to recover whatever bounty it has to pay Postmates (and, by extension, Google) for the order. Remember the triangle my host mentioned?
Obviously, the next time I will just call (though that wasn’t an option in this circumstance. I was underground). And sure, that $2.50, whoever got the money, is a small price to pay for a decent meal when you are sick.
But the battle over the financial clickstream in these circumstances is no mere matter of pennies. It’s a battle for the future. It’s a battle for survival of small merchants. It’s a battle for — against, really — market economics. (Who deserves to make the most money from a dinner order? The person who cooked the food or the person who owns the app?) And it’s a battle for transparency. I talk all the time about the Death of the Price tag. This is among the most clear examples I could offer. Quite seriously, no one can tell me why I paid $2.50, or where the money went. That’s hardly a functioning economy. It’s a battle of goliaths, and we’re just pawns. In Gotcha Capitalism, the best companies with the best products and the best customer service don’t win. Instead, the most sneaky firm wins. The firm with the best gotchas.
We don’t want that future.