FTC warned about a food delivery monopoly

The Democratic Party’s Eulji-ro Committee, including Chairperson Park Hong-keun, center, holds a press event at the National Assembly Monday urging the Fair Trade Commission to carefully study Delivery Hero’s acquisition of Woowa Brothers. [NEWS1]

Worries about a monopoly being created in the food delivery market are being raised as the Fair Trade Commission (FTC) examines last month’s takeover of Baemin by Berlin-based Delivery Hero.

A ruling party committee Monday urged the FTC to carefully evaluate how the acquisition of Woowa Brothers, which owns the country’s No. 1 food delivery app Baedal Minjok, known as Baemin, could affect the food delivery market.

The Democratic Party (DP) of Korea’s Eulji-ro Committee, an organization under the ruling party that deals in labor management disputes, held a press event with other organizations at the National Assembly Monday, including the Korea Federation Midsized and Small Merchant and the Self-employed Owners and Rider Union, a union of delivery workers.

In December, Berlin-based Delivery Hero acquired Woowa Brothers, but the deal needs approval from the FTC. Delivery Hero already owns Yogiyo and Baedaltong, the second- and third-largest food delivery apps in Korea.

“If Baedal Minjok and Yogiyo are both subordinated to Delivery Hero, it will dominate 90 percent of the market,” said the DP’s committee in a statement. “The FTC should separate the mobile delivery app market from the existing food service or online shopping markets to recognize it as an independent industrial field and evaluate it for a monopoly or other elements that limit competition.”

“Baedal Minjok’s argument that it will be operated as a separate corporate body [from Yogiyo] to maintain the competitive structure isn’t enough to end the controversy over a monopoly,” said Park Hong-keun of the ruling Democratic Party, who is chairperson of the committee. Park noted that automobile prices increased when Hyundai Motor acquired Kia Motors in 1998.

“To promote a market revolution, the creation of a monopolistic company shouldn’t be neglected,” said Rep. Je Youn-kyung of the Democratic Party, who is a member of the committee. “Start-ups will spread when competition in the market is revitalized.”

She added that a rise in bankruptcies resulting from bigger commissions paid to delivery apps is a “social cost” that could require political intervention.

“In the current delivery market, merchants pay around 5 percent of their sales [to delivery apps], but if the firms are merged, the number could go up to 10 percent,” said Kim Kyung-mu, a representative committee member of the Korea Franchisee Union. Consumers will eventually suffer, according to Kim.

Industry analysts said that if the FTC defines Baedal Minjok’s and Delivery Hero’s businesses as “food delivery apps,” the deal is not likely to go through because they will obviously become a monopoly. But if the market is broadly defined - including fresh food delivery or food delivery made through phone calls - the combined market share would be lower, improving the possibility of approval.

The evaluation period is 120 days since the acquisition was registered but is expected to last longer.

BY JIN MIN-JI [jin.minji@joongang.co.kr]