Fair Trade Commission building in Sejong City. 2023.10.13[Photo by Yoo Dae-gil]
South Korea's Fair Trade Commission has rejected the settlement proposals from Baemin and Coupang Eats regarding allegations of abuse of market dominance. The commission determined that the corrective measures proposed by both companies were insufficient to restore market order. As a result, the maximum fines for unfair trading practices are estimated to reach 510 billion won for Baemin and 42 billion won for Coupang Eats.
◆ Baemin proposes 300 billion won support plan for three cases; Coupang offers 60 billion won for one case
The Fair Trade Commission announced on June 18 that it had decided to reject the initiation of settlement procedures related to allegations of market dominance abuse by Woowa Brothers, which operates Baemin, and Coupang. The commission held plenary meetings on May 27 and June 10 to discuss the matter.
A "settlement procedure" allows a business accused of legal violations to propose remedies and improvements to trading practices. If the commission finds these proposals acceptable, it can conclude the case without determining whether a violation occurred. However, if the request for a settlement procedure is rejected, the commission will resume deliberations on the case.
Previously, Woowa Brothers submitted three cases for settlement, including demands for the best treatment, preferential treatment for its own delivery service, and misleading advertising regarding delivery times. Coupang submitted a request for one case related to demands for the best treatment in April but did not apply for a settlement regarding allegations of bundling.
In its request, Baemin proposed a 300 billion won support plan aimed at correcting competitive order. This plan includes eliminating conditions that forced partner delivery apps to set higher prices compared to Baemin and improving delivery quality for partner restaurants.
The 300 billion won support plan consists of a 140 billion won cooperation fund and 160 billion won in partner support. Baemin promised to subsidize delivery fees for partner restaurants and reduce commissions through the cooperation fund. The partner support includes coupon subsidies for partner restaurants.
Coupang proposed measures to eliminate misleading indicators regarding its Wow Store selection criteria and to stop linking the Wow Store system with free delivery benefits. The 60 billion won financial support for partner restaurants is intended for a cooperation fund and advertising marketing expenses.
◆ Fair Trade Commission: "Settlement proposals do not meet requirements; insufficient to restore market order"
The Fair Trade Commission deemed the companies' corrective measures inadequate for restoring market order.
A commission official stated, "Considering the nature of the case, the temporal context, and public interest, the proposals do not meet the requirements for initiating settlement procedures. The proposed remedies are insufficient for restoring competitive order, and many aspects overlap with promotions already in place," reflecting the examiners' concerns.
With the rejection of the settlement procedures, both companies will now undergo a fine assessment by the Fair Trade Commission. An official noted, "We will schedule a review based on the reports submitted in October and November of last year within this year."
The commission estimates the sales figures related to Baemin's three legal violations at 730 billion won for the best treatment demand, 7.78 trillion won for preferential treatment of Baemin delivery, and 7.78 trillion won for misleading advertising. For Coupang Eats, the sales figures related to its two legal violations are estimated at 710 billion won for the best treatment demand and 5.26 trillion won for bundling.
The potential fines for both delivery apps are a major concern in the industry. A commission official stated, "The fines for Baemin are expected to range from 239 billion to 510 billion won for the three cases, while Coupang's settlement request for the best treatment demand is estimated to be between 25 billion and 42 billion won."
◆ Baemin proposes 300 billion won support plan for three cases; Coupang offers 60 billion won for one case
The Fair Trade Commission announced on June 18 that it had decided to reject the initiation of settlement procedures related to allegations of market dominance abuse by Woowa Brothers, which operates Baemin, and Coupang. The commission held plenary meetings on May 27 and June 10 to discuss the matter.
A "settlement procedure" allows a business accused of legal violations to propose remedies and improvements to trading practices. If the commission finds these proposals acceptable, it can conclude the case without determining whether a violation occurred. However, if the request for a settlement procedure is rejected, the commission will resume deliberations on the case.
Previously, Woowa Brothers submitted three cases for settlement, including demands for the best treatment, preferential treatment for its own delivery service, and misleading advertising regarding delivery times. Coupang submitted a request for one case related to demands for the best treatment in April but did not apply for a settlement regarding allegations of bundling.
In its request, Baemin proposed a 300 billion won support plan aimed at correcting competitive order. This plan includes eliminating conditions that forced partner delivery apps to set higher prices compared to Baemin and improving delivery quality for partner restaurants.
The 300 billion won support plan consists of a 140 billion won cooperation fund and 160 billion won in partner support. Baemin promised to subsidize delivery fees for partner restaurants and reduce commissions through the cooperation fund. The partner support includes coupon subsidies for partner restaurants.
Coupang proposed measures to eliminate misleading indicators regarding its Wow Store selection criteria and to stop linking the Wow Store system with free delivery benefits. The 60 billion won financial support for partner restaurants is intended for a cooperation fund and advertising marketing expenses.
◆ Fair Trade Commission: "Settlement proposals do not meet requirements; insufficient to restore market order"
The Fair Trade Commission deemed the companies' corrective measures inadequate for restoring market order.
A commission official stated, "Considering the nature of the case, the temporal context, and public interest, the proposals do not meet the requirements for initiating settlement procedures. The proposed remedies are insufficient for restoring competitive order, and many aspects overlap with promotions already in place," reflecting the examiners' concerns.
With the rejection of the settlement procedures, both companies will now undergo a fine assessment by the Fair Trade Commission. An official noted, "We will schedule a review based on the reports submitted in October and November of last year within this year."
The commission estimates the sales figures related to Baemin's three legal violations at 730 billion won for the best treatment demand, 7.78 trillion won for preferential treatment of Baemin delivery, and 7.78 trillion won for misleading advertising. For Coupang Eats, the sales figures related to its two legal violations are estimated at 710 billion won for the best treatment demand and 5.26 trillion won for bundling.
The potential fines for both delivery apps are a major concern in the industry. A commission official stated, "The fines for Baemin are expected to range from 239 billion to 510 billion won for the three cases, while Coupang's settlement request for the best treatment demand is estimated to be between 25 billion and 42 billion won."
* This article has been translated by AI.
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