DH-Woowa deal under second FTC review

Korea Franchisee Union Secretary General Kim Jong-min, center, speaks during a press conference held at the head office of the People's Solidarity for Participatory Democracy in downtown Seoul, Tuesday. / Yonhap

By Kim Jae-heun

There never seems to be a peaceful day for the Korea Fair Trade Commission (KFTC) since it began reviewing the $4 billion deal of Delivery Hero's acquisition of Woowa Brothers.

Labor civic groups including the Korea Franchisee Union (KFU) and the Korean Confederation of Trade Unions (KCTU) held a press conference urging the government to cancel the acquisition.

“Delivery Hero and Woowa Brothers already own a combined 99 percent of the market share with their three delivery service players, which is already an unfair business practice,” the civic groups said. “We warn that the two firms will monopolize the market once they merge together and therefore we submitted a written opinion to the KFTC urging a thorough review and cancellation of their deal.”

This is not the first time the unions have come out against mergers and acquisitions (M&A) between the German and Korean companies.

In January, the KFU and the Korea Federation of Micro Enterprises held a joint press conference at the National Assembly with Rep. Choo Hye-sun of the minor Justice Party, accusing Delivery Hero of undermining its smaller rivals.

The labor civic groups' main argument has been concern over a potential monopoly, claiming that once Delivery Hero acquires Woowa Brothers, they could create business conditions that are unfair for both franchise owners and consumers.

People will be left with no alternatives if there is no competition in the market.

Currently, Baedal Minjok (Baemin), operated by Woowa Brothers, owns a market share of 55 percent to 60 percent, followed by Yogiyo and Baedaltong, both operated by Delivery Hero Korea, with a combined market share of 40 percent to 45 percent.

Delivery Hero Korea said it cannot make any specific comments on the issue as the antitrust watchdog is still reviewing the deal but it promised the whole contactless industry will benefit from the M&A.

“The combination of Delivery Hero and Woowa Brothers will bring positive effects to all small business owners, delivery drivers and consumers. Delivery Hero is making its best efforts to promote mutual growth between relevant players in the market amid the difficult time of the COVID-19 pandemic,” Delivery Hero wrote in a statement released to the press.

The German firm official added the company is open to making any change the KFTC advises.

The KFTC said the labor civic union's written opinion won't affect its review and it will focus on making a decision that will bring the most benefit to the people.

Woowa Brothers also said it cannot comment specifically about the deal but it said the 99 percent market share that the labor civic groups allege the combined firm will possess is not true.

“The research was conducted by an untrustworthy data measurement firm called Korean Click and it is already two years old. Now that several e-commerce giants like Coupang and Naver have started their delivery services, we do not hold a 99 percent market share when combined with Delivery Hero,” a Woowa Brothers official said. “Though it doesn't mean we hold a low market share.”

Currently, Coupang Eats and Naver's delivery service hold a combined market share no larger than 3 percent.

The Seoul Metropolitan Government and Gyeonggi Province revealed their position that they will not intervene in the private sector business. But both are preparing to offer their own public alternative food delivery services.

“It is a merger between two private firms. However, to increase the satisfaction of the people and small business owners, we launched a consortium with NHN PAYCO to create a public food delivery service application,” a Gyeonggi Province official said.

The food delivery service application will go through a testing period in September before being officially introduced to the public.

Seoul City will also launch a public food delivery service application in two months that will compete against Baemin, Yogiyo and Baedaltong.

Industry insiders predicted that the launch of the public delivery services will not create much difference in the local market as people are already comfortable making orders with the existing three players.