The new fee structure of South Korea’s largest food delivery app Baedal Minjok (Baemin) has sparked a debate over its potential monopoly status and may influence the regulatory review of the $4 billion buyout by German food delivery giant Delivery Hero (DH).

Woowa Brothers Corp., operator of Baemin, came under fire when it announced earlier this month it would move away from its fixed monthly commission system to start charging restaurants a 5.8 percent fee for every online order.

Restaurant owners slammed the move as a ploy to increase delivery fees, with one governor threatening to out Baemin with a public food delivery app.

The chief of Woowa Brothers immediately issued a public apology and vowed to take new measures. But the company’s sincerity was called into question when it later cut the incentive fees of its deliverymen.

Korea’s Fair Trade Commission (FTC) said it would take the latest controversies into account when reviewing DH’s acquisition of Woowa Brothers.

“While the new commission system was announced before the acquisition, it can be seen as a response to the planned tie-up,” said the FTC. “We’ll be looking into how the new structure will affect franchises and whether the costs could be passed on to customers.”

In December, the German delivery giant agreed to buy an 87 percent stake in Woowa Brothers for $4 billion. DH already owns two other Korean delivery apps, including the No. 2 Yogiyo. When combined with Baemin, which holds a 55.7 percent market share, DH would control nearly 100 percent of the Korea’s delivery app market.

Critics argue that the latest controversy is a sign of more monopoly abuses to come.

“This is an unacceptable deal by any standard that will create a 100 percent monopoly,” said Park Sang-in, professor of the graduate school of public administration at Seoul National University. “The FTC should not confuse monopoly with entrepreneurship, and strictly evaluate the matter with independence and professionalism.”

Park said Baemin’s market delineation needs to be more tightly drawn. Baemin is clearly operating in a “delivery app” market and not the overall delivery market, Park said, and added that Baemin could avoid monopoly designation if its market is defined as the broader online and offline delivery business.

“This controversy over new fees could be viewed as an abuse of market dominance,” said Shin Hyun-yoon, professor at Yonsei University Law School. “This is not likely to go down well during the merger review.”

Some, however, are calling for conditional approval of the acquisition considering its implications on the domestic economy, startup culture and benefits to consumers.

Jeon Sam-hyun, professor at Soongsil College of Law, said the merger should be seen from the perspective of large-scale platforms and global markets. “Instead of fixating on market share, we need to consider whether this would bolster the global competitiveness of our businesses and the economy at large, and how consumers would benefit,” he said.

His view was echoed by Chung Mina, the policy team manager at Korea Startup Forum.

“The merger between Baemin and Delivery Hero is not to dominate the Korean market but enhance the Korean app competitiveness in the global market,” Chung said. “Baemin should not be seen as a German company but a Korean company venturing overseas.”

By Lee Ho-Seung, Moon Jae-yong, Kang Min-ho and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]