Delivery Hero, Woowa Brothers nod to FTC regulations

The Korea Fair Trade Commission (KFTC) Chairperson Joh Sung-wook speaks during a press conference at the government complex in Sejong, on Sept. 8. / Courtesy of KFTC

By Kim Jae-heun

The country's leading food delivery players Woowa Brothers and Delivery Hero said they will observe the government's plan to strengthen the law that aims to stem abuse of power over the restaurant owners who use their platforms.

“If that is what the government plans to do, we have no option but to follow. We are in no position to argue against it,” both Woowa Brothers and Delivery Hero officials said.

The response came a day after the Korea Fair Trade Commission (KFTC), the country's top anti-trust regulator, confirmed its plan to possibly revise the current law to become much stricter so as to obligate local food delivery players to issue a binding contract with restaurant owners. This was in response to many platform users raising complaints that the food delivery platforms engaged in practices that resulted in verbal agreements being made without providing any supporting documentation.

Another issue was that when restaurant owners pay to advertise on one of the online platforms, the delivery firms failed to clarify in detail where and how the store name would be displayed. The new regulations will ensure platforms provide small business owners using the delivery companies' platforms detailed information about their advertising systems.

This was the case with the country's No.1 player Baemin in April when they adopted a fixed-rate system for advertisement fees coming from a flat rate system which they had been operating without seeking consent from restaurant owners.

KFTC said it will announce its decision whether or not to approve a multi-billion dollar acquisition deal proposed by Delivery Hero for Woowa Brothers.

The Korea Federation of Micro Enterprise instantly rose up against Woowa Brothers saying that they will boycott Baemin if it doesn't withdraw the new policy. Facing harsh criticism from the public, Woowa Brothers retracted the system less than a week after the announcement.

“All restaurant owners using ad services have to know how their store name will be advertised on the platform and according to what standard. However, it does not mean the food delivery players have to reveal their computer algorithm,” a government official said.

The regulator says it is also considering issues related to sharing between platforms and restaurants of customer data collected when orders are received through food delivery services.

Some restaurants argue that they have the right to receive customers' information including their mobile number or address. However, this was met with resistance from customers who have only agreed to share their personal information with the food delivery service platform.

A number of restaurant owners, especially those of medium-sized franchises, want customers' personal information for use in strategic marketing.

If the revised law is passed by the National Assembly it will come into effect from the first half of next year.

Meanwhile, the KFTC has decided to insert a new clause in the revised law that will require related disputes to be handled via mediation under the antitrust watchdog.