[Why&Next] Delivery App Commission Fees Back on the Table... Legislation for Cap vs. Regulatory Side Effects

National Assembly Renews Discussions
Detailed Regulations Expected Within the Year
Push for Revitalization of Public Delivery Apps

Discussions on legislative action to introduce a commission cap for delivery applications are once again gaining traction at the National Assembly. With the Social Dialogue body established by the Democratic Party of Korea’s Euljiro Committee for People’s Livelihood now finding it virtually impossible to produce a mutually beneficial proposal, momentum is building for a legislative push to cap commissions ahead of the upcoming parliamentary audit. At the same time, there are expectations that the revitalization of public delivery apps will be pursued as an additional solution to the commission issue. However, industry stakeholders and experts continue to voice concerns that a universal regulatory approach could have unintended consequences, with the risk that costs may simply be passed on to small business owners, delivery riders, and consumers.

According to political sources and industry insiders on September 14, the Euljiro Committee of the Democratic Party of Korea has recently held a series of forums related to delivery app commission fees. On September 11, a forum titled “Cases of Abusive Practices by Delivery Apps and the Direction for a Legislative Commission Cap” was held at the National Assembly Members’ Office Building in Yeongdeungpo-gu, Seoul. The event was premised on the notion that the current voluntary regulations, such as the so-called win-win pricing model, do not offer a fundamental solution. The burden of commission fees, delivery costs, and advertising expenses continues to weigh heavily on small businesses using these platforms, indicating the need for a different approach from the platforms’ own measures. The Euljiro Committee explained, “We held comprehensive discussions on the introduction of a ‘delivery app commission cap law’ to establish a fair and sustainable delivery ecosystem.”

Prospects for Rapid Advancement of Commission Cap Legislation

Based on these developments, there is speculation in the industry that the Standing Subcommittee on Legislative Review at the National Assembly’s Political Affairs Committee could introduce related delivery platform bills as early as this month. Currently, three separate bills concerning a commission cap for delivery apps have been submitted to the committee. These were proposed by Democratic Party lawmakers Kim Namgeun and Lee Kangil, as well as Park Junghoon of the People Power Party. While the specifics differ, all three share the core stipulation that the total commission cannot exceed 15% of the transaction amount. This includes the delivery fee, which is paid as wages for riders. For example, for an average order amount of 25,000 won, the platform would be allowed to retain only up to 7.8%. The delivery fee stands at 3,400 won. When factoring in payment gateway (PG) fees and other charges, the total burden on the business partner reaches approximately 24%. If any of these bills pass, this figure would have to be brought below 15%.

Experts, however, caution that sufficient deliberation and a prudent approach are required before enacting such regulations. A special advisor to the Political Affairs Committee, in a review report on the three bills, pointed out that these platform-specific regulatory measures could draw criticism and potentially trigger trade disputes with the United States. The report also suggested that separately regulating delivery platforms may not be an equitable approach and called for further discussion on this matter.

Revitalizing Public Delivery Apps as a Key Solution

Earlier, on September 9, the Euljiro Committee held the “Win-win Delivery App Policy Forum for Everyone” at the National Assembly Members’ Office Building. This reflects the government and governing party's policy direction of attempting to break up the current dominance of private delivery apps by bolstering public options. The Ministry of SMEs and Startups has allocated a new “Win-win Delivery App Support” program in next year’s budget proposal, totaling 124 billion won. Of this, 120 billion won will be earmarked for discount coupons and the remaining 4 billion won for public relations and marketing activities.

To this end, three to four out of the twelve public delivery apps currently operating nationwide will be selected for intensive support based on an evaluation of their public service capabilities and market potential. However, the form that such support takes may change. Lee Soyoung, nominee for Minister of SMEs and Startups, recently told small business owners that “simply providing coupons is unlikely to persuade consumers who have not been using win-win delivery apps to download them,” adding, “We will strive to streamline the budget allocation during the National Assembly’s review process.”

Intaeyeon, President of the Small Enterprise and Market Service (front row, far right), and other participants of the "Cooperative Delivery App Policy Forum for All" are taking a group photo. Photo by Small Enterprise and Market Service

Concerns Over Possible Side Effects, Including Increased Consumer Costs

As momentum builds behind the commission cap legislation, concerns are also mounting about possible negative side effects of such regulation. These concerns dominated the “Forum on the Effects of Delivery Platform Regulation on the Market and Reasonable Institutional Design,” convened on September 9 by People Power Party lawmaker Kim Jaeseop.

Choi Hwanhee, Professor of International Business at Fontys University, Netherlands, analyzed domestic monthly data from January 2022 to June of this year and found that after the spread of free delivery through subscription and membership models, both the market size and store owners’ revenue increased. He observed that since the introduction of the win-win pricing model, the per-order cost burden for store owners also appeared to be decreasing. Professor Choi suggested, “Given that these changes show significant impact, it will be necessary to comprehensively consider various indicators—including market size, consumer delivery charges, store owners’ revenue, and per-order burdens—in addition to simple commission levels when assessing the future effects of regulation.”

Lee Eunhee, Professor Emeritus of Consumer Studies at Inha University, recently conducted a survey of 1,000 delivery app users and found that if free delivery is eliminated on the platform they use, 54.2% would switch to another app offering free delivery, and 44.3% said they would reduce their use of the current app. Her conclusion is that changes in commission structures must be considered in tandem with their impact on consumer demand. Professor Lee noted, “If consumer benefits such as free delivery are reduced, or if costs are passed on to consumers due to regulation, the so-called ‘balloon effect’ may be especially pronounced among heavy users of delivery services—such as those in their 20s and 30s and families with young children who have higher delivery service needs.”

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