[Inside Chodong]A Delicate Approach to Regulating Delivery App Fees

The recent results of the "Survey on Perceived Satisfaction with the Three Major Delivery Companies," announced by the Ministry of SMEs and Startups and the Korea Commission for Corporate Partnership, once again highlight the unresolved issue of commission fees charged by delivery application (app) intermediaries. The average satisfaction score given by merchants using the three major delivery apps—Baemin, Coupang Eats, and Yogiyo—was 49.1 out of 100. While there were slight differences among the companies, none surpassed 50 points. Considering that the average score for large corporations evaluated in the win-win growth index was 73.47 points, the performance of the delivery apps appears even more lackluster. While delivery platform companies have emphasized increased profits for merchants using their platforms and have called for win-win growth and mutual prosperity, their efforts have fallen short of generating sufficient consensus.

The main problem cited was the commission fee. Although this has been a longstanding issue, it remains unresolved. Reflecting the agreement reached by the delivery platform win-win cooperation council, the two leading market players, Baemin and Coupang Eats, reduced their commission rates from the previous 9.8% to a differentiated rate of 2.0% to 7.8%, depending on sales, last year. Nevertheless, merchants reported that they did not feel the effect of the fee reductions. In the survey conducted in December, the average commission rate per order was 8.2%. The commission fee adequacy score was an especially low 38.2 points, and only 28.3% of respondents said they were satisfied with delivery app fees, which include both commission and delivery charges. Merchants continue to express frustration, saying that there is nothing left after sales.

The government's announcement this year that it will strictly address the abuse of monopoly status by delivery platforms and review measures to ease the commission burden for merchants reflects this reality. The policy objective is straightforward: to reduce the burden on small business owners whose livelihoods depend on delivery platforms. The challenge lies in how to achieve this. Simply capping commission fees, the most commonly suggested solution, is far from a fundamental fix. There are many differing opinions on whether a coercive regulation that imposes an upper limit on fees, as currently discussed in the political arena, will actually achieve the policy goal. This is because the interests involved in the delivery app business ecosystem are extremely complex. Some argue that such regulations would increase costs for consumers, thereby reducing consumer benefits; others worry that platforms would lower delivery fees paid to riders, thereby decreasing rider income. There are also concerns that restricting the industry could ultimately threaten the survival of merchants in the long term.

Even if a cap on commission fees were imposed, there would still be debate over what the appropriate level should be. According to the Ministry of SMEs and Startups’ survey, merchants considered an appropriate commission rate to be 4.5%. To meet this demand, platform companies would have to accept a halving of their commission revenue, which is unrealistic.

The rationale for protecting small business owners is important. However, the prevailing opinion inside and outside the industry is that adding hastily prepared regulations based solely on this rationale does not constitute a real solution. It is necessary to carefully examine how changes to commission fees would affect the tangled interests of other stakeholders that support this ecosystem. A regulatory design that both eases the burden on small business owners and ensures the continued innovation and expansion of platforms is also required. The government might also consider providing incentives to encourage companies to agree with and participate in these policy goals. Although merchants gave a score of 49 points, 94.7% responded that they had not considered discontinuing the use of delivery apps. No one wants to see this ecosystem destabilized. Rather than heavy-handed regulation, a meticulous and nuanced approach is needed.

This content was produced with the assistance of AI translation services.