The Fair Trade Commission has begun sanctions against Baemin and Coupang Eats for their demands for 'most favored nation' pricing, but it remains unclear whether small and public delivery apps will regain price competitiveness. Since the investigation began, the combined market share of the two companies has exceeded 90%, while orders for other delivery apps have actually decreased.
To change the entrenched duopoly, there are calls for policies that support the growth of small delivery apps or the entry of new private operators into the market.
According to the Fair Trade Commission on November 9, Coupang Eats began demanding most favored nation pricing from its partner vendors in July 2023. Baemin followed suit in May 2024. The Fair Trade Commission launched an investigation on July 17, 2024, prompted by concerns raised in the National Assembly, complaints, and media reports, and sought voluntary cessation through a cooperative body established six days later.
However, both companies did not comply, leading the Fair Trade Commission to form a dedicated team in May of last year, with sanctions finally decided on September 29, approximately two years and three months after the investigation began.
A Fair Trade Commission official explained, "The processing time was affected by the procedures for consent agreements and cancellations, as well as the return to the main case." A consent agreement allows a company to submit a corrective plan, which the Fair Trade Commission can accept, thus concluding the case without determining legality. The agency stated that time was spent on drafting reports and gathering opinions as part of the consent agreement process, as well as ensuring the right to defense for the businesses involved.
During this time, the delivery app market solidified into a duopoly dominated by Baemin and Coupang Eats. According to the Fair Trade Commission, the combined market share of the two companies based on order value rose from 88.10% in 2023 to 92.89% last year. In contrast, the market share of Yogiyo fell from 10.22% in 2023 to 3.98% from January to May this year.
Small apps also saw a decline in transaction volume. Comparing the periods before and after Baemin's most favored nation demand, the average monthly orders for Baemin and Coupang Eats increased by 14%, and order value rose by 16%. During the same period, other delivery apps experienced a 25% drop in order numbers and a 15% decrease in order value.
Even small delivery apps that promoted lower commission rates struggled to secure price competitiveness. For instance, Ddaengyeoyo, which has a commission rate of 2%, found it difficult to differentiate prices. A Fair Trade Commission survey revealed that 72.6% of Ddaengyeoyo's partner vendors set prices similar to those of Baemin and Coupang Eats, with 36.6% citing the most favored nation demands from the two companies as the reason.
Even if partner vendors lowered menu prices on delivery apps with lower commission burdens, they had to reduce prices on larger apps as well. Refusal to do so could result in exclusion from membership benefits where orders are concentrated. The Fair Trade Commission concluded that this structure limited price competition for small delivery apps.
The most favored nation demands have also impacted price increases in the delivery app market. Baemin raised its own delivery commission rate from 6.8% to 9.8% in August 2024, matching Coupang Eats. The Fair Trade Commission analyzed that the demands from both companies and Baemin's commission increase contributed to a general rise in market prices.
Comparing the six weeks before and after Baemin's most favored nation demand and commission increase, the menu prices for Baemin's own delivery and store delivery rose by approximately 0.9% and 0.7%, respectively, while Coupang Eats saw an increase of about 1%. The average minimum order amount for Coupang Eats rose from 15,338 won in April 2024 to 16,003 won in February last year, a 4.3% increase. Baemin also saw a 1.3% rise during the same period.
There are analyses suggesting that Coupang Eats' most favored nation demand influenced price increases at its competitor Baemin. According to the Fair Trade Commission's economic analysis, based on an order amount of 25,000 won, the menu prices for Baemin's own delivery rose by 350 won, while store delivery prices increased by 1,650 won. Among the 62,378 partner vendors that accepted Coupang's demands, 47,048 (about 75%) worsened their trading conditions with Baemin in exchange for improved conditions with Coupang Eats.
The Fair Trade Commission believes that this action will allow partner vendors to freely determine menu prices and minimum order amounts across platforms, improving conditions for new and small delivery apps to enter the market. However, there are forecasts that simply improving price competition conditions may not be enough for small delivery apps to regain market share in an already entrenched duopoly.
Lee Hwang, a professor at Korea University Law School, stated, "While public and small delivery apps may gain some indirect benefits, they face limitations in emerging as strong competitors in terms of fundamental competitiveness and consumer choice. To change the duopoly, existing delivery apps need to consolidate to achieve competitive scale, or new private operators must be supported to enter the market through favorable policies."
* This article has been translated by AI.
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