Accused of hiking fees on restaurants, Baemin operator apologizes

Woowa Brothers, the operator of the country’s top food delivery app Baemin, apologized Monday over revisions to its system for charging restaurant owners, following accusations that the changes further burdened businesses already reeling from the impacts of the coronavirus.

“Woowa Brothers deeply apologizes for causing a spike in cost to some businesses,” Woowa Brothers CEO Kim Beom-jun wrote in a statement, just one day after the company argued Sunday that its new charging system was “reasonable and fair.”

But Kim also said the company would maintain the controversial new system while “instantly working on improving the Open Service system.”

Open Service is one of two ways restaurant owners can pay to be part of Baemin - formally known as Baedal Minjok - in which they pay a per-delivery percentage to the app operator. Another way for restaurants to be supported by the delivery service is through its Ultra Call service, in which restaurants pay a flat monthly rate of 88,000 won ($72).

Both services also give restaurants access to banner advertisements that appear in the app. Woowa Brothers announced last week it would lower the per-delivery rate for the Open Service system from 6.8 percent to 5.8 percent.

The change also increased the number of Open Service restaurants that would be displayed in the scrolling list of banner ads, pushing the second-tier Ultra Call ads farther down on the list. Previously, only three Open Service restaurants were randomly visible on the app’s page. The app also limited its Ultra Call restaurants to a narrower geographic area.

The changes were broadly seen as encouraging more restaurants to migrate from Ultra Call to Open Service, despite the former being preferable to many small restaurants because of its flat monthly rate.

But Kim maintained that overall the new policy was essentially a wash, with the number of restaurant owners who paid more under the revised system roughly equal to the number who paid less.

It also vowed to return half the amount Open Service users pay in April and said it would release its data on the effects of the rate revision in the future.

Woowa Brothers argued the revision benefited 52.8 percent of its clients when it introduced the changes on April 1, but withdrew that claim Monday, following a strong backlash from restaurant owners. With the April 15 general elections looming, politicians also joined in the chorus of critics.

“Delivery apps, including Baemin, are pursuing excessive profit, and are driving small business owners to the edge of the cliff when situations are extremely painful for the self-employed,” Gyeonggi Gov. Lee Jae-myung wrote on Sunday.

Lee said he has received an approval from the city of Gunsan, in North Jeolla, to use its public food delivery app in Gyeonggi.

The Gunsan city government launched the app last month to reduce the burden on small enterprise operators. Restaurant owners use the app without paying for a membership, commission or advertisement fees. It handled more than 5,000 orders in two weeks.

Rep. Kim Jin-pyo of the Democratic Party said Monday, “The party will more actively respond to the damages caused by Baemin’s wrong commission-charging system, and the damage caused by the monopoly.”

In December, Woowa Brothers was acquired by the Berlin-based Delivery Hero, which also operates the country’s No. 2 delivery app, Yogiyo. The Fair Trade Commission is currently evaluating the acquisition.

“Food delivery is an on-demand service, and whether it should be of public interest is questionable,” said Seo Yong-gu, a business administration professor at Sookmyung Women’s University. “The timing of Baemin’s fee revision was inappropriate, given the impact of Covid-19 on the self-employed.”

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