Yogiyo fined for bullying restaurants on prices

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Yogiyo fined for bullying restaurants on prices

Yogiyo motorbikes are seen parked in Seongdong District, eastern Seoul, on Tuesday. Delivery Hero Korea, which operates Yogiyo, was fined 468 million won ($382,000) Tuesday for interfering in the management activities of restaurants. [NEWS1]

Yogiyo motorbikes are seen parked in Seongdong District, eastern Seoul, on Tuesday. Delivery Hero Korea, which operates Yogiyo, was fined 468 million won ($382,000) Tuesday for interfering in the management activities of restaurants. [NEWS1]

The Fair Trade Commission (FTC) fined Delivery Hero Korea, operator of Yogiyo, 468 million won ($382,000) for taking advantage of its market position to push a lowest price policy on restaurants several years ago.

 
The antitrust body said Tuesday the food delivery operator prohibited restaurants from charging cheaper prices on food delivered by competing delivery companies. The restaurants were dropped if they failed to comply.
 
Yogiyo maintained the policy from 2013 through 2016, but halted it in 2016, when the FTC initiated a probe.  
 
“From July 2013 through December 2016, Yogiyo discovered 144 restaurants that violated its lowest price policy,” the FTC said in a statement. “They were either required to lower their prices on Yogiyo or raise their prices on other delivery apps.”  
 
Forty-three restaurants were forced to cancel contracts with Yogiyo when they didn’t comply.    
 
“Yogiyo used its market position to limit restaurants’ right to freely set prices, interfering with their management activities,” the statement added.
 
Yogiyo is the second largest food delivery company, accounting for 26.7 percent of the market in 2017, after Baedal Minjok, which accounted for 64.5 percent in the same year. Baedaltong, also operated by Delivery Hero Korea, was third with 8.8 percent.
 
Berlin-based Delivery Hero in December announced it was buying a hundred percent stake in Woowa Brothers, operator of Baedal Minjok, also known as Baemin. They are waiting to get the FTC approval.
 
Following the FTC announcement, Delivery Hero Korea said it was “sorry” for the decision, saying it didn’t have that much market influence in 2013 and that the policy was intended to benefit customers.  
 
“It has only been a year or two since Yogiyo started gaining market influence, and therefore, it didn’t have the superior position [to affect restaurants’ decisions],” said Kim Hee-yeon, a spokesperson for Delivery Hero Korea.
 
Yogiyo was started in 2012. 
 
“The lowest price policy is a common marketing strategy in the retail industry,” Kim added. "Some restaurants argue they set higher prices on Yogiyo because it charges commissions on orders instead of charging monthly advertisement fees [like Baemin] […] People are price sensitive with food, and, therefore, the policy was intended to raise users’ trust in Yogiyo.”  
 
Yogiyo charges a 12.5 percent commission per order. 
 
“Promising to provide the lowest price is a common marketing strategy among retailers, but the issue with Yogiyo was that it forced restaurants to take responsibility for offering the cheapest price,” said Prof. Seo Yong-gu, who teaches business at Sookmyung Women’s University.  
 
Cho Hong-seon from the FTC said in a briefing Tuesday that “the latest punishment is a separate issue from the merger [between Delivery Hero and Woowa Brothers] because it’s about the abuse of market power.”
 
Cho Won-hee, CEO at law firm D’Light Law Group, agrees they are separate issues, but says the fine could affect public sentiment about Delivery Hero acquiring Woowa Brothers.  
 
“The penalty is about abusing market superiority while a decision on the acquisition will be based on whether Delivery Hero could limit competition following the acquisition,” Cho said. “Regardless, the penalty could have a negative impact [on Delivery Hero and Woowa Brothers] getting the FTC nod because it suggests Delivery Hero could further use its market position unfairly.”
 
Baemin’s decision in April to revise the advertisement payment system, which caused a major backlash from some restaurants, is another factor that could negatively affect the FTC decision on the acquisition, according to Cho.  
 
BY JIN MIN-JI   [jin.minji@joongang.co.kr]
 

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