KFTC to regulate Delivery Hero Korea over illegal price fixing
Yogiyo and Baedaltong logos / Courtesy of Delivery Hero
By Kim Jae-heun
The Korea Fair Trade Commission (KFRC) said it will hold a meeting next Wednesday to decide on restrictions to be imposed on Delivery Hero Korea over price fixing of local restaurants' menus.
The German firm, which operates the country's second-biggest delivery player Yogiyo, has allegedly been preventing restaurant owners from giving discounts to customers who ordered food over the phone.
It also threatened to delete the restaurants from the Yogiyo application when the owners encouraged people not to order through the mobile app, for which they have to pay a 12.5 percent commission per order.
Between 2013 and 2017, Delivery Hero Korea launched a lowest-price-guarantee program that compensates customers if they paid more by ordering on Yogiyo. When customers notified the German firm that other delivery players or restaurants themselves were offering better prices than on Yogiyo, it gave them e-coupons equivalent to the price difference.
In this way Delivery Hero Korea was able to figure out which restaurants had been giving discounts to phone order customers. Restaurants that refused to follow Delivery Hero Korea's terms were booted from the German firm's application service.
The KFTC said Delivery Hero Korea's interference in restaurant owners' right to set their prices is a violation of the Fair Trade Act that infringes customers' right to order food at lowest prices.
When the antitrust regulator began investigating this issue in 2017, Delivery Hero Korea suddenly stopped giving out e-coupons. The KFTC sees this as an admission of guilt from the German firm.
Delivery Hero Korea said it gave out e-coupons to compensate its customers for paying more by using Yogiyo.
“We did it for the good of our customers and to stick to our motto that Yogiyo will offer the lowest price when customers order with our application,” a Delivery Hero Korea official said.
“Also, we never warned restaurant owners not to encourage people to order on the phone or give them a penalty when they did,” the official added. “We only put in place restrictions on those who charged a more expensive price for the same food on our app than they did on other delivery apps.”
To solve this issue, the antitrust regulator will first look into whether or not Delivery Hero holds dominance over restaurant owners as a result of its market share.
Until two years ago, Yogiyo held 30 percent of the market share in the food delivery service sector and restaurant owners had virtually no choice other than to cooperate with Yogiyo or No.1 player Baedal Minjok to find customers.
Meanwhile, the KFTC announced Monday it will make a new guideline to regulate online platform operators like Naver, Kakao and Woowa Brothers.
The decision followed after its understanding that online business is a whole new market with different characteristics from that of offline.
The online platform operators connect sellers and customers in between on an open market system, which makes it hard for old guidelines that regulate only sellers and customers.
“The gross merchandise value of online business grew enormously to record over 134.5 trillion won last year but due to the outdated guidelines that cannot regulate new platform operators, we were not able to carry out law enforcement,” a KFTC official said.
The antitrust regulator will finalize the new guideline draft by the end of this year and implement it starting in 2021.