Delivery app leaders Baedal Minjok and Coupang Eats have been found to restrict market competition by demanding 'most-favored-nation' treatment from their partner businesses, according to the Fair Trade Commission (FTC). The fines imposed on the two companies total 631.9 billion won, marking the largest penalty ever levied against delivery app operators.
On November 9, the FTC announced that it had provisionally fined Woowa Brothers, which operates Baedal Minjok, 331.1 billion won, and Coupang 300.8 billion won, along with corrective orders. Baemin's fines stem from three practices: demanding most-favored-nation treatment (160.2 billion won), forcing partners to switch to in-house delivery (155.4 billion won), and misleading advertising regarding delivery times (15.4 billion won). Coupang's fines are solely related to the most-favored-nation demands.
Most-favored-nation treatment involves requiring partner businesses to align menu prices, minimum order amounts, and discount benefits with those of competing apps or to offer more favorable terms on their own app. From July 2023 to January 2024, Coupang excluded partner businesses that did not comply from its 'Wow Store' program. Similarly, Baemin granted 'Baemin Club Store' status only to in-house delivery partners that met certain conditions from May 2024 to October 2023.
The FTC determined that restaurants excluded from membership benefits experienced significant revenue declines, leading most partners to comply with the demands. The simultaneous requests for most-favored-nation treatment from the two companies, which together hold over 90% market share, resulted in similar commission rates and trading conditions, creating effects akin to collusion and restricting competition.
This situation has led to increased delivery app commission rates and menu prices. In fact, Coupang maintained its commission rate at 9.8%, while Baemin plans to raise its rate from 6.8% to match Coupang's 9.8% by August 2024.
The FTC also issued a separate corrective order regarding Coupang's terms that imposed intermediary and payment fees on discounts borne by store owners. However, it decided to re-examine allegations of 'bundling' Coupang Eats' free delivery benefits with its Wow membership, as there was a discrepancy in interpretation between Coupang and FTC examiners regarding the concepts of primary and ancillary products.
Hwang Won-cheol, a standing commissioner at the FTC, stated, "It is likely the first case in the world where the top two market-dominating companies are simultaneously penalized for demanding most-favored-nation treatment. The demands in an oligopolistic market can cause significant competitive harm."
On November 9, the FTC announced that it had provisionally fined Woowa Brothers, which operates Baedal Minjok, 331.1 billion won, and Coupang 300.8 billion won, along with corrective orders. Baemin's fines stem from three practices: demanding most-favored-nation treatment (160.2 billion won), forcing partners to switch to in-house delivery (155.4 billion won), and misleading advertising regarding delivery times (15.4 billion won). Coupang's fines are solely related to the most-favored-nation demands.
Most-favored-nation treatment involves requiring partner businesses to align menu prices, minimum order amounts, and discount benefits with those of competing apps or to offer more favorable terms on their own app. From July 2023 to January 2024, Coupang excluded partner businesses that did not comply from its 'Wow Store' program. Similarly, Baemin granted 'Baemin Club Store' status only to in-house delivery partners that met certain conditions from May 2024 to October 2023.
The FTC determined that restaurants excluded from membership benefits experienced significant revenue declines, leading most partners to comply with the demands. The simultaneous requests for most-favored-nation treatment from the two companies, which together hold over 90% market share, resulted in similar commission rates and trading conditions, creating effects akin to collusion and restricting competition.
This situation has led to increased delivery app commission rates and menu prices. In fact, Coupang maintained its commission rate at 9.8%, while Baemin plans to raise its rate from 6.8% to match Coupang's 9.8% by August 2024.
The FTC also issued a separate corrective order regarding Coupang's terms that imposed intermediary and payment fees on discounts borne by store owners. However, it decided to re-examine allegations of 'bundling' Coupang Eats' free delivery benefits with its Wow membership, as there was a discrepancy in interpretation between Coupang and FTC examiners regarding the concepts of primary and ancillary products.
Hwang Won-cheol, a standing commissioner at the FTC, stated, "It is likely the first case in the world where the top two market-dominating companies are simultaneously penalized for demanding most-favored-nation treatment. The demands in an oligopolistic market can cause significant competitive harm."
* This article has been translated by AI.
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