The Korea Fair Trade Commission (KFTC) has decided to impose a total fine of 631.9 billion won on Baemin and Coupang Eats, prompting consumer groups to express concerns that such excessive penalties could diminish consumer benefits like discounts and free delivery.
They argue that even when regulating unfair practices by platforms, it is essential to comprehensively assess the actual impact on market competition and consumer welfare.
On November 9, Consumer Watch issued a statement urging the KFTC to consider the overall effects on the market rather than simply categorizing the demand for most-favored-nation clauses as anti-competitive behavior.
Earlier, the KFTC announced its decision to fine Woowa Brothers, the operator of Baemin, 331.1 billion won and Coupang 300.8 billion won. The commission concluded that both companies restricted market competition by demanding unfavorable pricing and discount terms from restaurants compared to competing delivery apps.
The most-favored-nation clause requires platforms to demand that partner restaurants offer terms that are as favorable as or better than those offered by competitors. The KFTC found that the top two delivery apps simultaneously made such demands, weakening commission competition and leading to similar pricing and terms for food delivery.
In contrast, Consumer Watch contends that the most-favored-nation clause can also serve as a means to provide consumers with competitive prices and discounts while promoting competition among platforms.
They stated, "While the most-favored-nation clause may limit price competition among platforms, it can also provide consumers with competitive prices and discounts, thus fostering price competition among platforms. Therefore, rather than categorically defining the most-favored-nation clause as anti-competitive, we should assess its actual effects on the market comprehensively."
Consumer Watch emphasized the need to analyze the most-favored-nation clause in conjunction with market structure, transaction conditions, price changes, and consumer welfare. They also pointed out that the KFTC's judgment regarding the occurrence of competitive restrictions, such as price and commission synchronization, should be thoroughly verified for causality and consumer benefits.
Additionally, they argued that the allegations of bundling Coupang's Wow membership with Coupang Eats services require careful consideration. Since the KFTC has ordered a re-examination of this matter, they stressed that it should not be prematurely classified as an unfair practice before a final judgment is made.
Consumer Watch stated, "Bundling various services can provide consumers with free delivery and discount benefits while promoting competition among companies. It is preferable to regulate such practices post-factum if actual competitive restrictions are confirmed, rather than preemptively prohibiting them."
They also raised concerns that the burden of fines could lead to increased consumer prices or reduced services. Consumer Watch warned, "If platforms lose their incentive to secure competitive prices or offer membership benefits, discounts and free delivery services may diminish. With the added burden of over 600 billion won in fines, we must consider the potential for increased consumer prices or reduced services."
However, they maintained that actions obstructing rational consumer choices should be held accountable. They pointed out that Baemin's practice of calculating estimated delivery times differently for store delivery and self-delivery could mislead users, necessitating correction in terms of accurate information provision.
Consumer Watch urged the KFTC to adequately consider the competitive effects and consumer benefits of the most-favored-nation clause and bundling, advocating for proportional post-regulation only when substantial competitive restrictions are proven. They emphasized that the goal of fair trade policy should not be to control business practices or impose fines but to expand consumer choice and welfare through free competition.
* This article has been translated by AI.
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