[Inside Chodong] Why Are Riders Opposing the Delivery App Commission Cap?

On June 27, more than 20 riders affiliated with delivery agency partners from 10 regions across the country?including Seoul, Gwangju, and Daegu?gathered in front of the National Assembly. They came together to voice their opposition to the ongoing discussions regarding a cap on delivery app commission fees. Assembled under the name of the National Delivery Partners' Association for the Practice of Sound Policy (Jeonbaemo), the riders asserted that “lowering commission fees will result in a decrease in delivery fees.” This was the first time that riders, a key pillar of the delivery ecosystem, had publicly opposed the commission cap. The commission cap, which was also a campaign pledge of President Lee Jaemyung, is focused on reducing the burden on restaurant owners who use delivery apps. So why would riders, who might be considered to share a similar position of vulnerability, oppose a measure aimed at easing the burden on restaurant owners? The answer lies in the current structure of the delivery app industry, where the platform’s commission fees and the delivery fees paid to riders are inextricably linked.

Jeonbaemo stated, “The delivery industry is structured so that store commission fees and rider delivery fees are directly connected. The purpose of the commission cap is to artificially lower intermediary commission fees to reduce the burden on stores, but this directly leads to a decrease in delivery fees, resulting in reduced earnings for riders.” While the claim that lowering commission fees will immediately lead to a drop in delivery fees may be somewhat overstated, there is a well-founded concern that it could have an impact and ultimately reduce riders’ income.

According to industry sources, delivery fees for riders range from 3,000 to 4,000 won per order in provincial areas, and around 5,000 won in Seoul and the metropolitan area. During severe weather, delivery fees can rise to 6,000 to 7,000 won or more. However, the delivery fees currently paid by restaurants are based on their sales through delivery apps: the top 35% pay 2,400 to 3,400 won, the next 35?50% pay 2,100 to 3,100 won, and the bottom 50% pay 1,900 to 2,900 won. This means that the total delivery costs that delivery apps are required to pay to riders can be up to twice as high as the delivery fees collected from restaurants.

The remaining costs are covered by the delivery apps and consumers. Moreover, as delivery apps have increasingly competed to offer free delivery, the burden on consumers has continued to decrease, and recently, delivery apps have been using their commission income to cover the remaining delivery costs. For example, Baedal Minjok, the industry leader, saw its outsourcing expenses?primarily rider delivery fees?reach 2.2369 trillion won last year, a 73.4% increase from the previous year, far outpacing its sales growth rate. In this situation, if the government’s proposed commission cap reduces revenue, it will inevitably affect the current delivery fee system. Whether this will lead to a decrease in delivery fees as riders fear, force consumers to bear more of the cost as free delivery promotions are scaled back, or result in delivery apps absorbing the losses remains to be seen. What is certain is that it could have a significant impact on the entire delivery ecosystem.

The commission cap is now being seriously discussed in a social dialogue mediated by the Democratic Party’s Committee for the Protection of the Vulnerable (Euljiro Committee), with participation from Woowa Brothers (the operator of Baedal Minjok), the National Franchise Owners’ Association, and the Association for Fair Platforms, among other groups representing restaurant owners. These groups have called for a cap on the total commission?including intermediary and delivery fees?at 15%. The Democratic Party has already introduced several bills related to the commission cap. Until July, the commission policy will be discussed through this social dialogue, and if no agreement is reached, it is highly likely that the commission cap will be formally pursued. However, riders, who are directly and indirectly affected by commission reductions, are not included in these discussions. Can a proper social consensus be reached without the voices of the riders on the ground? The perspectives of frontline riders must also be reflected in these discussions.