Franchise Industry Association, "Baemin Abuses Monopoly Position"
Reported to Fair Trade Commission for Price Abuse, Self-Preferencing, and Most-Favored-Nation Demands
The Korea Franchise Industry Association is filing a complaint with the Fair Trade Commission against Woowa Brothers, the operator of the number one delivery application 'Baedal Minjok'. The reason is that they raised delivery fees (commissions) charged to franchisees without justifiable cause by abusing their monopoly position. The association urged the Fair Trade Commission to conduct a strict investigation, stating that franchise stores nationwide are facing closure risks due to high delivery costs, unfair practices such as preferential treatment of subsidiaries, and other issues.
Jung Hyun-sik, Chairman of the Korea Franchise Industry Association, is speaking at a press conference reporting the violation of the Fair Trade Act by "Baedal Minjok," hosted by the Korea Franchise Industry Association, held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the morning of the 27th.
"Abuse of Market Dominance"... Franchise Association Files Complaint Only Against 'Baemin'
On the morning of the 27th, the Korea Franchise Industry Association held a press conference at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, announcing that they are reporting Baedal Minjok to the Fair Trade Commission for various unfair practices, including significantly raising delivery app usage fees twice while holding a monopolistic position.
On that day, the association claimed, "Baemin significantly increased delivery app usage fees twice without any change in the costs required to provide the service and without justifiable reasons." They further demanded, "Baemin must prove the 'justifiable reasons' for raising delivery fees while other delivery app operators have maintained their fees at a consistent level for a long time."
In March 2022, Woowa Brothers changed the Baemin delivery usage fee paid by franchisees from a flat rate of "1,000 KRW per order" to a percentage rate of "6.8% of the order amount," and in August, they raised the commission rate from 6.8% to 9.8%. The association pointed out, "Assuming an average order price of 20,000 KRW, a 6.8% fee corresponds to 1,360 KRW, which is a 36% increase from the previous 1,000 KRW." They added, "Franchisees had no choice but to choose Baemin delivery due to consumer preference for 'HanJip Delivery' (Baemin delivery) and Baemin's discount coupon support policy despite the percentage-based fee system." They emphasized, "The second commission increase was an act based on monopolistic dominance and represents Baemin's unreasonable price abuse, as Baemin holds about 60% market share in the delivery app market."
The association explained that Baemin was singled out for the complaint because it is the undisputed number one operator, and it was judged that Baemin had widely engaged in unfair practices such as price abuse. Since price abuse cases vary in timing, behavior, and specific details, and recognizing them as illegal is complex and difficult, focusing on one operator first is considered more effective. The association is also collecting cases of unfair practices involving Coupang Eats and Yogiyo. An association official stated, "We judge that Coupang's unfair trade practices are no less serious than Baemin's."
"Preferential Treatment of Subsidiaries and Unfair Management Interference... Stores Are on the Brink of Closure"
The association pointed out that franchisees are forced to close due to high delivery app commissions, describing a structure where the more they sell, the more they lose because of the high commission rates. Chairman Jeong Hyun-sik criticized, "Delivery apps promise free delivery benefits to consumers but shift the cost burden onto franchisees."
Chairman Jeong also noted that unlike the government’s 13 reductions in credit card merchant fees from July 2007 to January 2022, there has been no effort to reduce intermediary and payment fees of delivery apps, demanding, "The government must step in and devise measures." The association is currently preparing a campaign to encourage consumers to place delivery orders through public delivery apps or franchise brand-owned apps. Additionally, they are considering creating and operating a public delivery app at the association level.
Jung Hyun-sik, Chairman of the Korea Franchise Industry Association, is speaking at a press conference reporting violations of the Fair Trade Act by 'Baedal Minjok,' hosted by the Korea Franchise Industry Association, at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the morning of the 27th.
The association also criticized Baemin, the market-dominant operator, for preferential treatment of its own company through discriminatory transaction conditions. They claimed that Woowa Brothers’ operation of Baemin delivery services through its subsidiary Woowa Cheongnyeon constitutes "preferential treatment of subsidiaries" by inducing customers of competing delivery agencies to transact with the subsidiary. Furthermore, the association condemned Baemin for making Baemin delivery more visually prominent than store delivery on the Baemin app screen, calling it preferential treatment of its own company.
The association pointed out that Baemin’s introduction of the free delivery subscription service 'Baemin Club' included an unfair management interference by requiring franchisees to set menu prices equal to or lower than those on other delivery apps.
Meanwhile, the association revealed that they had separately met with Woowa Brothers earlier to request switching the percentage-based fee system to a flat rate or lowering the commission rate to 5% if maintaining the percentage-based system, but Baemin rejected these proposals.
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