The New York City Council’s Delivery Protection Act (DPA) presents last-mile operators with an anti-consumer choice: convert Delivery Service Partners (DSPs) from independent contractor workers to W-2 employees or pay a $500,000 bond for every worker kept under contract. It would effectively scrap the current model—and it would backfire on consumers.
Today’s delivery system network works well. Large logistics and e-commerce companies contract with specialized Delivery Service Partners to service consumers in “last mile” delivery—both hiring and managing drivers as demand fluctuates. The proximity of many last-mile operators to customers, along with partnerships with specialized DSPs that handle driver management and flexible capacity, has allowed carriers to keep per-package costs low and delivery times short. This model has supported the rapid growth in volume of packages in New York—and the rest of the country—enabling consumers to enjoy lower prices and accessible, reliable service.
The DPA forces the network behind these deliveries to change completely. Industry relies on third-party networks to deliver consumers’ products and services at prices they can afford. Partnerships between facility operators and DSPs allow facility operators to provide most of the capital (warehouses, vans, delivery stations), while small business owners through DSPs can specialize in managing drivers, hiring, scheduling, and supervising assigned routes. DSPs can help save costs by cutting or expanding capacity in high-demand times without carrying a large year-round workforce and competing for routes to meet consumer demand most efficiently.
By bringing all these operations in-house—effectively forcing traditional, W2 employment over independent contract work—the entire process is disrupted, leaving facility operators with higher costs and without the benefits of specialization. Because of the large bond payments and the outright ban the DPA puts on subcontracting, facility operators have a strong incentive to absorb DSP drivers or exit the arrangement entirely. That eliminates the ability to expand or cut capacity with demand and removes the specialization DSPs provide in hiring, scheduling, and route management, raising year-round labor costs. Amazon has already warned that relocating to New Jersey would be easier than operating in New York.
Rearranging these voluntary worker arrangements would ultimately be terrible for New York City consumers, who would pay through higher prices and degraded services.
Estimates from the consulting firm AKRF show that the average cost per package across delivery services could increase 58 to 95 percent citywide. If businesses decide to relocate outside of New York City to avoid that mandate, every route starts farther from consumers and the average distance each package travels increases. Longer routes mean drivers spend more time crossing bridges, tunnels, and paying tolls, raising the cost per package and lowering the delivery volume, causing costs to rise 160 to 267 percent. Many businesses will pass these costs onto households, causing consumers to pay up to $664 more each year.
Such an increase in costs for consumers should not come as a surprise to New York City. When regulators set a higher minimum pay rate for food delivery drivers, consumers paid the price. Platform fees paid by consumers increased by 67 percent a year after the law was implemented, and the total costs for consumers increased by 4 percent. By disrupting the business model of delivery services, New York City invites operators to absorb their costs, or try to hold their costs down and reduce the quality of their service.
While higher prices for consumers are a rational response to higher costs, the DPA is likely to reduce the quality of service too. Removing the incentives to work with DSPs and independent contractors also reduces available drivers and staff that make it possible to coordinate deliveries quickly and meet consumer demand. Without the same networks of warehouses and last-mile facilities as before, same-day deliveries would be scaled back and wait times would be longer.
Overall, the DPA creates new compliance requirements that are bad for consumers. Instead of a mandate that would raise prices, degrade service, and push last-mile delivery options out of the market, New York City should consider how laws that disincentivize an already efficient delivery network hurt consumers and fail to achieve their desired policy aims.
Pablo Garcia Quint is a technology policy analyst with the American Consumer Institute, a nonprofit education and research organization. Follow Pablo on X @gq_pablo