Woowa Brothers to drop controversial new fee system
Lawmakers of the ruling Democratic Party of Korea hold a press conference at the National Assembly in Seoul, Jan. 1, urging Korea's antitrust regulator to carry out an impartial evaluation of Delivery Hero and Woowa Brothers' $4 billion M&A deal. / Yonhap
By Kim Jae-heun
Woowa Brothers, the operator of the country's top online food delivery player Baedal Minjok (Baemin), said Friday it will drop its recent new fee system that provoked backlash from both restaurant owners and customers.
In a statement released through email, Woowa Brothers founder Kim Bong-jin and CEO Kim Bom-jun said the company will nullify the fixed rate system and go back to the flat rate.
“We are sorry for the difficulties and confusion we created with the new fee system. It was a decision that did not thoughtfully consider the hardships that restaurant owners would possibly face. We have received advice and opinions from various sectors and they all said we should re-examine our new commission fee rate. We have accepted the advice and decided to cancel our new fee system,” Woowa Brothers wrote in the statement. “From now on, we will communicate with restaurant owners before we make changes to our policy. We will discuss the matter with government officials too.”
Prior to the announcement, Woowa Brothers had been sticking to its “firm stance” that there would be no changes made to its “rational” new fee system as it would have charged a higher commission to those making more money with its delivery service platform.
However, as controversy grew over the issue, turning public sentiment cold against Baemin, CEO Kim was quick to issue a written public apology admitting the company had failed to consider the increased advertising expenses for restaurant owners. Kim promised to come up with corrective measures.
The Korea Fair Trade Commission (KFTC) also announced it would scrutinize the matter after expressing deep concern over Woowa Brothers' unilateral decision to change the commission fee system. The top antitrust regulator said it will also visit the firm to check if Woowa Brothers is taking care of private customer data collected through the delivery service application.
This is likely to affect the KFTC's decision on whether or not to approve the $4 billion deal of Delivery Hero and Woowa Brothers.
The antitrust regulator initially planned to conditionally approve the German firm's planned acquisition of Woowa Brothers. However, given the ongoing controversies and calls by lawmakers defending the interests of small- and medium-sized enterprises (SMEs) under President Moon Jae-in and his economic team's policy to protect them, chances have increased that the KFTC may block the suggested acquisition proposal or delay the approval indefinitely.
At least 13 politicians here have made a pledge to develop a public online delivery application as part of their general election campaigns. Eight local governments including North and South Gyeongsang provinces have already started developing applications related to online food delivery services that charge zero-level commission fees.
It is uncertain how many of these applications will actually be developed for customer use in reality, but they are causing a headache for Woowa Brothers.
People have become aware that Baemin will no longer be a domestic mobile service. Also, the German company Delivery Hero already owns the No.2 and No.3 online food delivery players Yogiyo and Baedaltong, so if it also acquires the No.1 delivery service, it could dominate the market and increase commission fees at its own leisure.