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| Logos of food delivery applications Yogiyo and Baedaltong operated by Delivery Hero / Courtesy of Delivery Hero |
By Kim Jae-heun
Delivery Hero's $4 billion deal to acquire Woowa Brothers is faltering despite earlier predictions it would proceed smoothly.
The Korea Fair Trade Commission (KFTC) recently imposed a 468 million won ($388,156) penalty on Yogiyo, the No.2 player in the food delivery service market operated by Delivery Hero, for illegal price fixing of client restaurants' dishes.
Although the antitrust watchdog denied that one case would have such an effect on the M&A deal, it showed how Yogiyo could abuse its power to hurt both restaurant owners and customers at the same time. This clashes with several elements that the KFTC is considering on whether to approve the deal.
The antitrust watchdog's main role here is to make sure that customers are not negatively affected from the German and Korean firms' business combination.
"We cannot say much about this deal as it is a sensitive issue. But what we can say is that the M&A deal should not bring down the quality of service, increase delivery fees or prevent other competitors from joining the market," a KFTC official said.
Currently, Woowa Brothers operates the No.1 food delivery application Baedal Minjok (Baemin), which takes up a 55.7 percent market share, according to the Korea Franchise Association. Yogiyo and No.3 player Baedaltong, which is also operated by Delivery Hero, have a 33.5 percent and 10.8 percent, respectively.
If the KFTC approves Woowa Brothers' acquisition by Delivery Hero, the combined entity will monopolize the market with a 100 percent share.
Civic group Consumers Korea expressed its deep concern that people will face steeper prices because there will be no competitors in the market offering a better service or lower prices.
The antitrust watchdog said consumers don't order food with mobile applications that often, and when it expands the notion of the market to include phone and online orders, mobile application orders only make up 15 percent of the share in the food delivery service market, worth 20 trillion won in 2018.
When looking at the M&A between Auction and Gmarket, the top two players in the e-commerce market in 2009, the KFTC approved the deal under the condition that they would not increase their commission fees for three years.
If the antitrust watchdog does not limit the market to only mobile application services when reviewing the deal, experts predict it could approve Delivery Hero's acquisition of Woowa Brothers without any conditions.
KFTC Chairwoman Joh Sung-wook also mentioned that the Woowa acquisition could promote innovation in the field and she will balance this factor with other aspects that can harm consumers in the case of a monopoly when making her final decision.
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