By The Navarro Report
A sweeping consumer-protection law reshaping how California’s food delivery platforms handle refunds has been in effect since January 1, and eight months in, it is exposing a familiar fault line: rules written to protect consumers can shift financial risk onto the small businesses least equipped to absorb it.
Assembly Bill 578, authored by Assemblymember Rebecca Bauer-Kahan and signed into law last fall, requires DoorDash, Uber Eats, Grubhub and other third-party delivery platforms to issue full refunds to a customer’s original payment method whenever an order arrives late, wrong or not at all. The law explicitly bars platforms from settling those complaints with in-app credit rather than actual money, a practice consumer advocates say allowed companies to keep disputed transactions off their books while keeping the customer locked into future orders. Platforms must also provide an itemized breakdown of what a delivery driver was paid, tipped and awarded in bonuses for each order, and they can no longer use tip income to offset a driver’s base pay. Customers who cannot resolve a complaint through a platform’s automated system must be given access to a live customer service representative.
The bill builds on the 2020 Fair Food Delivery Act, which first established baseline protections against price markups and unauthorized use of restaurant trademarks on delivery platforms. Bauer-Kahan has said the update responds to years of complaints that platforms’ automated systems left customers and restaurants with no meaningful way to dispute errors, calling the previous system inadequate for the volume of complaints the industry generates.
For consumers, the change is straightforward: a customer who orders $220 worth of food that never arrives is now entitled to a full $220 refund to their card, not a partial credit toward a future order. But the mechanics of that guarantee are where the law’s impact on restaurants becomes more complicated. Under AB 578, platforms retain the ability to investigate suspicious or fraudulent refund claims, but that verification process is handled internally by the companies themselves — DoorDash, Uber Eats and Grubhub, not the restaurants whose food is being disputed. Restaurant operators, who often have no visibility into a refund claim once an order leaves the counter, warn that the law creates an opening for abuse that they, rather than the platforms, may ultimately absorb.
That concern carries particular weight in San Diego, where restaurant margins were already under pressure heading into 2026. Local operators interviewed by regional outlets since the law took effect have described a familiar dynamic: a platform issues a refund to resolve a customer complaint quickly and avoid a dispute, but the underlying cost — whether through reduced payouts, adjusted commission structures, or simply the lost revenue from an unpaid order — flows back to the restaurant rather than the platform absorbing it directly. One operator likened the risk to identity-theft-style fraud, noting that once a system makes it easy to get a full refund with minimal friction, it is not the platform that feels the impact first, it is the restaurant.
The law’s rollout has also collided with broader scrutiny of delivery platforms’ internal practices. Days after AB 578 took effect, DoorDash was forced to publicly deny allegations, which spread rapidly after a viral social media post, that the company used a hidden “desperation score” to determine driver pay based on a worker’s financial need. DoorDash CEO Tony Xu called the claims “appalling” and issued a detailed rebuttal denying that the company tracks driver financial desperation or suppresses base pay based on tipping behavior. While unrelated in origin, the controversy underscored the level of distrust that has built up around delivery platforms’ compensation algorithms — the same algorithms AB 578’s itemized-payment disclosure requirement is designed to make more transparent.
From a policy standpoint, AB 578 fits a broader pattern in Sacramento of legislating consumer protections into gig-economy platforms after years of complaints that self-regulation was insufficient. The bill passed the Legislature without significant industry opposition on the record, a contrast to the fight this month over expiring craft-liquor shipping rules, where wholesalers and distributors spent heavily to block competition. Delivery platforms, unlike the alcohol distributors and Teamsters coalition in that fight, did not mount a comparable public lobbying campaign against AB 578, though this may reflect the sheer size and profitability of the biggest platforms relative to the compliance costs the law imposes, rather than genuine support for the changes.
For San Diego restaurateurs still absorbing post-pandemic cost increases in labor, ingredients and commercial rent, the practical question is not whether AB 578 protects consumers — it plainly does — but whether the California Legislature or the delivery platforms themselves will address the verification gap that leaves restaurants financially exposed to refund claims they cannot see or dispute. Absent additional guardrails, restaurant operators say the law risks becoming another cost center passed down the supply chain, a familiar pattern in an industry where the businesses actually preparing the food have the least leverage over the platforms selling it.
The Navarro Report will continue to track AB 578’s enforcement and any legislative follow-up addressing restaurant-level fraud exposure as the law’s first full year plays out.