Kim, a living-alone student who frequently uses delivery applications (apps), has become a habit of looking for restaurants that can deliver free of charge when ordering food. I compared the delivery time to receive the food quickly, and the estimated time of the store I wanted was more than 45 minutes, and I finally chose self-delivery because I was informed that self-delivery” operated by the delivery app was 15 minutes faster.” Recently, the minimum order amount has been raised and more food has to be ordered than before, but all large delivery apps are at a similar level, so there was no choice.
Baedal Minjok and Coupang Eats, the country’s two largest delivery apps, were fined 631.9 billion won by the Fair Trade Commission for forcing them to offer more favorable prices and terms of transaction than competing apps. This is the first time that delivery app operators have been sanctioned for abuse of market-dominant status, and the two companies have been fined the largest ever in the delivery industry.
On the 9th, the Fair Trade Commission announced that it has decided to impose 331.1 billion won on Woowa Brothers, which runs Baedal Minjok, and 3008 billion won on Coupang, which runs Coupang Eats. The FTC’s biggest problem is that the two companies demanded “most favorable treatment” from their stores, including favorable prices and discounts over competing apps. Restaurants that refuse to do so have virtually no choice but to accept their requests by excluding them from free delivery services.
Coupang Eats, a latecomer in the industry, charged a 9.8 percent commission, higher than Baemin’s, but pressured restaurants to shoulder the burden themselves. Coupang Eats is not allowed to sell food at a higher price because of the high commission. From July 2023 to January this year, it was excluded from the “Wow Store,” which requires consumers to match prices with other delivery apps and provides free delivery benefits if they do not comply.
Baemin also introduced a “Baemin Club” in response to Coupang Eats’ increased share and pressured stores in a similar way. It raised its own delivery fee rate the same as that of Coupang Eats and excluded it from Baemin Club if it did not comply with the demand. Coupang Eats’ Wow store ratio rose from 13% in 2023 to 94% last year, and Baemin Club store ratio rose from 63% in 2024 to 80% last year, as companies worried about a drop in sales accepted this.
Eventually, the burden was on consumers as the price of food and the minimum order amount rose in line with the high commission. After Coupang Eats’ action, the average minimum order amount for Baemin’s own delivery rose 4.7 percent from 15,675 won in July 2023 to 16,415 won in February 2024. After Baemin’s action, Coupang Eats’ average minimum order amount increased 4.3% from 15,338 won in April 2024 to 16,003 won in February last year.
On top of that, Baemin also used a trick to hide related screens from view or display the expected delivery time differently to induce consumers with “self-delivery” with higher commission income. The “store delivery” in which the store takes charge of delivery shows the time conservatively calculated by the store owner as it is, while the self-delivery reflects the actual delivery time.
The Fair Trade Commission judged that the actions of the two companies, which have a combined share of 92.9%, resulted in competition restrictions equivalent to collusion. In fact, while the trading volume of the two companies increased by 14-16% the trading volume of small and medium-sized delivery apps decreased by 15-25%.
Coupang Eats warned of legal action, saying the disposition was excessive. In particular, regarding the fine, the FTC strongly protested, saying that it has not changed the actual terms of the transaction or has included sales of companies that the company has not even contacted in the calculation standard. Coupang explained that in the review report (the prosecution’s indictment) received in October last year, the penalty was between KRW 25 billion and KRW 42 billion based on the sales related to the charges. The Fair Trade Commission has since increased the fine by expanding the standard to “total delivery sales” unrelated to the charges. Coupang Eats emphasized that “Wow Store” is a policy that allows restaurant owners to voluntarily set reasonable prices and helps increase sales by providing free delivery support. Baemin’s side said in an official statement, “We have sincerely explained that there is no illegality, but it is regrettable that it has not been accepted enough.” However, he only said that he would review the resolution and continue mutual efforts, but did not indicate a policy of objection.
[Reporter Lee Soomin / Reporter Gong Junho]
