Concerns Grow Over Delivery Commission Cap: Will Costs Shift to Consumers and Riders?

Most "Commissions" Go to Rider Labor Costs
Concerns That Cap System Will Lower Welfare for All Stakeholders
Already Phased Out in the United States

Concerns are mounting over the proposed "commission cap system" for delivery services, which is currently being reviewed by political circles and the government. While the system is being promoted as a way to reduce the burden on small business owners, such as restaurants registered on delivery platforms, there are worries that essential costs may instead be shifted to other key players in the delivery ecosystem, namely consumers and riders. In particular, since delivery fees make up the largest portion of the costs paid by merchants to delivery applications (apps), riders are voicing strong concerns that setting a cap lower than the current level, including delivery fees, will inevitably result in reduced income.

According to the delivery platform industry on July 28, when considering the total amount that a merchant pays per order to the platform as a "commission," the largest portion is the rider’s labor cost. For example, for an average order of 25,000 won, a restaurant in the top 35% of delivery app sales in Seoul pays 6,710 won to the platform. Of this, more than half?3,400 won?is the delivery fee paid by the merchant. The next largest component is the brokerage fee, fixed at 7.8%, amounting to 1,950 won. The remainder consists of payment settlement fees and value-added tax.

Looking more closely at the delivery fee, assuming the average delivery fare per order in Seoul and the metropolitan area is around 5,000 won, the merchant covers 3,400 won, while the rest is shared between the platform and the consumer. Since last year, as delivery platforms have increasingly offered free delivery to compete with each other, it has become common for the platform to cover the delivery fee paid to riders from its commission revenue, rather than the consumer paying directly.

Riders argue that in this structure, introducing a commission cap system will inevitably lead to a reduction in delivery fees. If commissions decrease, delivery apps will either have to absorb the loss themselves, pass more of the delivery cost onto consumers, or adjust the per-delivery payment to riders. Given the current competitive environment, it is seen as most likely that the per-delivery payment to riders will be reduced.

These concerns are based on actual reductions in rider earnings following the implementation of a "win-win" fee system earlier this year, which lowered brokerage fees for merchants. Lee Jimin, CEO of a delivery partner company in Seoul with over 550 affiliated riders, said, "After analyzing both long-distance and short-distance calls before and after the introduction of the win-win fee system, we found that the average delivery fee per order decreased by about 1,000 won." He added, "Currently, the average hourly wage is between 14,000 and 17,500 won. If this falls further, after deducting fuel, maintenance, and insurance costs, riders won't even make minimum wage."

There are also concerns that a reduction in commission revenue could lead to decreased investment by platforms and higher delivery costs for consumers. Such side effects have already been observed in the United States, where commission caps were previously introduced. In many cases, even merchants’ sales declined, prompting significant policy revisions. For example, in New York City, a bill was passed in May raising the maximum commission rate for delivery apps from 23% to 43%. In San Francisco and British Columbia, Canada, legislation was revised to remove the cap entirely. This is because, in the medium to long term, commission caps led to a loss of competition among delivery apps, resulting in lower service quality and a decrease in delivery orders due to higher consumer costs.

An industry official stated, "Delivery app commissions are not just simple brokerage fees; they are the main source of funding for both rider wages and platform operations," adding, "A commission cap system could shrink the delivery industry, ultimately harming all stakeholders, including business owners."