[Graphics by Song Ji-yoon]
Delivery Hero (DH) has received multiple remedial orders from the Korean antitrust authority for incompliance in the terms of sustaining the competitiveness of Korea’s No. 2 food delivery app Yogiyo before the sale as a conditional approval of the German company’s acquisition of Woowa Brothers, the operator of country’s dominant food delivery platform Baedal Minjok (Baemin).
DH has been unable to sell Yogiyo by Jan. 2 deadline to fully divest Delivery Hero Korea that operates Yogiyo after a six-month extension in compliance with the conditional approval to its $4 billion deal signed in December 2019 to buy Baemin.
DH however has not received punitive action after the remedial order from the Fair Trade Commission (FTC). It is yet to reveal the progress in the sale and other incompliance terms.
According to sources on Tuesday, the FTC’s corrective order was issued to DH headquarters and DH Korea after the antitrust watchdog issued clarification orders at least seven times between February and August last year, asking it to explain some actions that were believed to have undercut the competitiveness of Yogiyo. The sale deadline was initially set on Aug. 2.
Maeil Business Newspaper learned that the FTC’s orders contained compulsory measures to prevent business practices that could undermine Yogiyo`s value.
DH has been suspected of condoning weakening in Yogiyo’s market share to bolster Baemin’s influence in the food delivery market. FTC believed DH had tried to weaken Yogiyo’s market influence by reducing the promotion of delivery fees paid to Yogiyo riders. This violates one of the FTC conditions for the M&A deal, which prohibit unfavorable changes to the working conditions of delivery worders at Yogiyo. DH received a corrective order for this violation.
It also was asked to why it stopped promotion at stores trading on the Yogiyo app.
DH undermined Yogiyo`s competitiveness and minimized investment to the extent that it does not violate the law under the advice of Seoul-based law firm Kim & Chang, said a person familiar with the situation before and after the transaction.
The FTC has not issued any punitive action since the weakening of Yogiyo was “consequential”. Amid stalled sale, Yogiyo’s share in the market plunged to 18 percent from 41.1 percent from 2019. Baemin’s dominance in the ballooned food delivery market under Covid-19 environment deepened to a share of 66 percent as of January last year from 50.9 percent.
The valuation of Yogiyo that was estimated at 2 trillion won ($1.7 billion) has more than halved to around 800 billion won.
By Jin Young-hwa and Minu Kim
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]