Delivery Win-Win Council Fails to Agree on Fees... Mediation Proposal Suggests Average Fee of 6.8%

Failure to Agree on Commission Fees in 11th Meeting
Public Interest Committee Proposes Mediation... Increased Possibility of Regulatory Legislation

The ‘Delivery Platform-Merchant Win-Win Council’ failed to reach an agreement on commission fees at its 11th meeting. Although the public interest commissioners proposed mediation principles during this meeting, the platforms’ win-win proposals did not align with them. The mediation proposal suggested applying differential commission fees while ensuring that the average brokerage commission rate does not exceed 6.8%. This rate was the commission fee applied by Baedal Minjok before the increase earlier this year. Both Baemin and Coupang Eats did not agree to return to the pre-conflict commission levels as per the mediation principles.

The Delivery Platform-Merchant Win-Win Council announced on the 8th that the public interest commissioners disclosed their mediation principles at the 11th meeting held the previous day. The mediation proposal first suggested applying differential brokerage commission rates based on store sales levels, considering the burden on small self-employed business owners. It also proposed that the average brokerage commission rate should not exceed 6.8%, and that a 2% brokerage commission rate be applied to the bottom 20% of stores by sales. The highest brokerage commission rate would be lower than the current level (9.8%). The proposal also included maintaining the current fixed delivery fee system of 1,900 to 2,900 KRW borne by merchants. Since merchants actually bear a fixed amount of delivery fees, the use of the term ‘free delivery’ in consumer promotions was advised to be discontinued. Additionally, the proposal called for stopping the provision of delivery app membership benefits that infringe on merchants’ pricing rights and hinder commission fee reduction competition among delivery platforms.

Baedal Minjok and Coupang Eats expressed willingness to introduce differential commission rates beyond their previous proposals, but these did not conform to the mediation principles. Baemin proposed charging a brokerage commission of 7.8% and delivery fees of 2,400 to 3,400 KRW for the top 30% by transaction volume; 6.8% commission and delivery fees of 2,200 to 3,200 KRW for the 30-80% range; and 2.0% commission with delivery fees of 1,900 to 2,900 KRW for the bottom 20%. Baemin’s proposal was contingent on Coupang Eats implementing a similar level of win-win measures.

Coupang Eats proposed a brokerage commission of 9.5% for the top 10%, 9.1% for 10-20%, 8.8% for 20-50%, 7.8% for 50-65%, 6.8% for 65-80%, and 2.0% for the bottom 20%, while standardizing the delivery fee at 2,900 KRW. Additionally, it suggested imposing surcharge costs on the top 50% by transaction volume.

The proposals from Baemin and Coupang Eats differ significantly from the merchants’ unified demand to reduce the basic commission fee to 5% and introduce differential commission rates by sales brackets, lowering rates to as low as 2%. They also somewhat diverge from the public interest commissioners’ mediation principles. The commissioners attempted to persuade Baemin and Coupang Eats to present win-win proposals that align with the mediation principles but judged that this was not achieved. Both companies’ proposals were criticized for not sufficiently fulfilling the purpose of the Win-Win Council’s establishment.

The public interest commissioners requested Coupang Eats to submit a new win-win proposal closer to the mediation principles by the 11th and asked Baemin to review whether improvements are needed in its current win-win proposal. Regarding key demands from merchants excluding commission fees?such as displaying merchant-borne items on consumer receipts, stopping demands for most-favored-nation treatment, and sharing delivery driver location information?win-win measures were reportedly reached.

The government plans to establish a foundation for continuous communication among stakeholders to create a win-win environment in the delivery app market. It will also expand the scope of merchant surveys, add and revise survey items, and conduct tailored co-growth evaluations for delivery platforms.