PSPD Files Fair Trade Complaint Against Woowa Brothers and Korea 153 Over "Baemin Only"

Suspected Violations of the Fair Trade Act and the Franchise Business Act
"Infringing the Freedom of Choice of the Self?Employed and Consumers, Strengthening Monopoly"

Civil society organizations including the People's Solidarity for Participatory Democracy (co?representatives Paik Misun, Jin Youngjong, and Han Sanghee), associations of franchisees, and self?employed business owners filed complaints with the Korea Fair Trade Commission against Woowa Brothers Corp. (CEO Kim Beomseok), the operator of Baedal Minjok, and Korea 153 Co., Ltd. (CEOs Kim Gangheung and Shin Donguk), the franchisor of Cheogajip Seasoned Chicken, on suspicion of violating the Monopoly Regulation and Fair Trade Act and the Fair Transactions in Franchise Business Act, respectively.

They argue that the two parties entered into an exclusive dealing memorandum of understanding (MOU) that prevents Cheogajip Seasoned Chicken franchisees from listing on any delivery app other than Baedal Minjok, and that this "Baemin Only" promotion violates current law and infringes on the freedom of choice of franchisees and consumers.

On the morning of the 24th, participants at the press conference titled "Report to the Fair Trade Commission on Baemin Only that Violates the Choice Rights of Self-Employed Individuals and Consumers and Strengthens Monopoly," held at Areumdri Hall on the 2nd floor of Chamyeoyundae in Jongno-gu, Seoul, are holding placards criticizing the Baemin Only contract and chanting slogans. Chamyeoyundae

On the 24th, the People's Solidarity for Participatory Democracy, the Committee on People’s Livelihood and Economy of Lawyers for a Democratic Society (Minbyun), the National Franchisee Association, and the Association of CEOs for a Fair Platform announced that they had recently filed complaints with the Korea Fair Trade Commission, alleging violations of the Monopoly Regulation and Fair Trade Act and the Fair Transactions in Franchise Business Act, in connection with the "Baemin Only" contract signed between Baedal Minjok (hereinafter Baemin) and Cheogajip Seasoned Chicken.

That morning, the organizations held a press conference titled "Report to the Fair Trade Commission on Baemin Only that infringes the choice of self?employed and consumers and strengthens monopoly" at Areumdri Hall on the 2nd floor of the People's Solidarity for Participatory Democracy in Jongno?gu, Seoul, where they condemned Baemin's unfair practices and urged the Fair Trade Commission to conduct a thorough investigation and impose stern sanctions.

On January 27, Woowa Brothers Corp., which operates Baemin, signed a strategic partnership MOU with Korea 153, which operates Cheogajip Seasoned Chicken, and from February 9 implemented the "Baemin Only" program, under which franchisees that list exclusively on Baedal Minjok are offered reduced commission fees.

Under the program, if a franchisee refrains from using other delivery apps and trades exclusively with Baemin, the brokerage commission is reduced from the existing 7.8% to 3.5%.

Moderated by Lee Yeonju, secretary of the Livelihood Economy Team at the People's Solidarity for Participicipatory Democracy, the press conference was followed by explanations from the lawyers in charge of the Fair Trade Commission complaints, and then presentations by Kim Jinwoo, co?chair of the National Franchisee Association, on "Restrictions on Franchisees' Freedom of Choice under Franchise Headquarters Contracts," and by Kim Junhyung, chair of the Association of CEOs for a Fair Platform, on "Condemning Unfair Discrimination Against Non?Franchise Merchants on the Platform."

The organizers of the press conference stated that the purpose of the Fair Trade Commission complaint was that "this 'Baemin Only' contract is likely to significantly undermine the order of fair competition, as it causes disadvantages in the form of depriving Cheogajip Seasoned Chicken franchisees, Baedal Minjok merchants, and ultimately consumers of their freedom of choice."

On the morning of the 24th, an attendee at the press conference titled "Complaint to the Fair Trade Commission alleging Baedal Minjok Only infringes the choice of self-employed business owners and consumers and strengthens monopoly," held at Areumdeuri Hall on the 2nd floor of Chamyeo Yeondae in Jongno-gu, Seoul, is holding the complaint filed with the Fair Trade Commission and shouting a slogan. Chamyeo Yeondae

The Fair Trade Commission complaints regarding "Baemin Only" were filed on two counts: violation of the Monopoly Regulation and Fair Trade Act by Woowa Brothers Corp., and violation of the Fair Transactions in Franchise Business Act by Korea 153.

Attorney Park Hyun?yong of the Committee on People’s Livelihood and Economy of Minbyun, who is in charge of the complaint alleging violation of the Monopoly Regulation and Fair Trade Act by Woowa Brothers Corp., said, "As a market?dominant enterprise, Baemin’s act of temporarily reducing the brokerage commission for Cheogajip Seasoned Chicken from the existing 7.8% to 3.5% on the condition that it lists exclusively on Baemin constitutes an abuse of market?dominant position," adding, "This not only strengthens franchisees’ dependence on Baemin in the chicken franchise sector, where reliance on delivery sales is very high, but also deprives store owners of opportunities to diversify their revenue sources, thereby potentially infringing on their rights."

Attorney Park argued that the "Baemin Only" contract falls under the following prohibited practices under the Monopoly Regulation and Fair Trade Act: (i) exclusive dealing (Article 5, Paragraph 1, Item 5), (ii) unfairly excluding competitors (Article 45, Paragraph 1, Item 3), and (iii) abuse of superior bargaining position (Article 45, Paragraph 1, Item 6), and stressed that "a thorough investigation and stern sanctions are necessary to uphold the order of fair competition."

Attorney Kim Daeyoon of the Committee on People’s Livelihood and Economy of Minbyun, who is in charge of the complaint alleging violation of the Fair Transactions in Franchise Business Act by Korea 153, the franchisor of Cheogajip Seasoned Chicken, pointed out, "Even though Baemin’s market share has eased to around 57.6% from the near?monopolistic 80-90% levels in the past, forcing franchisees to list only on Baemin can still cause losses to franchisees even if brokerage commissions are reduced," adding, "In particular, under the terms of the current contract, franchisees that do not participate in 'Baemin Only' were excluded from the '6,000?won instant discount' promotion, which not only harms them in competition among franchise brands, but also creates a situation in which competition could intensify even among participating franchisees within Cheogajip Seasoned Chicken."

Attorney Kim explained that the "Baemin Only" contract constitutes the following violations under the Fair Transactions in Franchise Business Act: (i) tying or conditional transactions (Article 12, Paragraph 1, Item 2), (ii) abuse of superior bargaining position (Article 12, Paragraph 1, Item 3), and (iii) unfair infringement of business territory (Article 12?4).

On the morning of the 24th, at Areumdeuri Hall on the second floor of the People's Solidarity for Participatory Democracy in Jongno-gu, Seoul, at a press conference titled 'Report to the Fair Trade Commission on Baemin Only That Violates the Choices of Self-Employed People and Consumers and Strengthens Monopoly,' a placard criticizing the Baemin Only contract was placed on the desk of Lee Yeonju, coordinator of the Livelihood Economy Team at the People's Solidarity for Participatory Democracy, who chaired the event. A People's Solidarity for Participatory Democracy participant is holding the Fair Trade Commission complaint and shouting slogans. People's Solidarity for Participatory Democracy

Previously, Baemin had stated that the purpose of introducing the "Baemin Only" contract was "to seek to increase franchisees’ sales and profits by easing their commission burden and supporting discount promotions based on the voluntary participation of franchisees."

However, participants in the press conference refuted Baemin’s claim that "there is no disadvantage even if franchisees do not participate," arguing, "In a structure where franchisees inevitably suffer losses if they do not take part in the promotion, it is absurd to describe their participation as voluntary."

Kim Jinwoo, co?chair of the National Franchisee Association, said, "Franchisees are already bearing a double burden of excessive supply prices imposed by headquarters and delivery fees, while the headquarters is in fact further strengthening its dependence on delivery apps," adding, "There is no guarantee that this Cheogajip Seasoned Chicken case will not spread to other franchise sectors, and in the end franchisees’ dependence on delivery apps will increase and their burden will become even heavier."

On the morning of the 24th, Kim Junhyung, chair of the Association of CEOs for a Fair Platform, speaks at a press conference titled "Baemin Only: Infringing the Choice of Self-Employed Business Owners and Consumers and Strengthening Monopoly" held at Areumdeuri Hall on the 2nd floor of People's Solidarity for Participatory Democracy in Jongno-gu, Seoul. Photo by People's Solidarity for Participatory Democracy

Kim Junhyung, chair of the Association of CEOs for a Fair Platform, said, "It has been years since self?employed business owners began complaining about the burden of delivery fees following the Yoon Suk Yeol administration’s 'win?win rate system,' yet Baemin continues to favor only large franchise chains while ignoring the demands for shared growth from ordinary small self?employed business owners," and urged, "Baemin should abolish the 'Baemin Only' policy, which deceives merchants and consumers, and instead take genuine steps toward shared growth with business owners."

Previously, self?employed business owners and civil society organizations had criticized the "Baemin Only" arrangement between Baemin and Kyochon Chicken. In addition, on September 18 last year, they filed a complaint with the Fair Trade Commission accusing Baemin of discriminatory treatment against ordinary merchants by allowing different discount rates for a small number of large franchise chains and applying different levels of exposure on the app compared with ordinary self?employed merchants when running the "One Bowl Free Delivery" promotion.

Nonetheless, they argue that Baemin continues to entrench a structure that preferentially treats a small number of large franchise chains, shifting the costs of platform competition onto ordinary self?employed business owners.

The participants condemned Baemin’s unfair practices and at the same time called for a reduction in excessive brokerage commission costs in order to promote shared growth with merchants on the platform.

They appealed, "The Fair Trade Commission must thoroughly investigate and sanction the alleged violations related to this 'Baemin Only' contract so that it does not spread across the industry and become entrenched as structural discrimination, and must devise measures to restore fair competition in the delivery app market."