Regulators prevents monopoly, helps to create synergy
The Korea Fair Trade Commission (KFTC) has conditionally approved a deal sought by Germany's Delivery Hero (DH) to acquire the nation's largest food delivery app operator, Woowa Brothers. The antitrust agency granted permission for the $4-billion takeover on the condition that the German company sells off its equity in Yogiyo, Korea's No. 2 food delivery app brand. Officials said that if the government permits the “merger” of Korea's largest and second-largest food delivery apps unconditionally, it will lead to adverse effects caused by a monopoly, such as fewer consumer benefits and higher commissions.
The trustbuster made the right move, given its primary duty of encouraging fair competition and protecting consumers. The number of food delivery app users in Korea was totaled at about 27 million as of August, more than half of the country's population. No fewer than 350,000 restaurants use the service provided by about 120,000 delivery workers. Put together, the two largest delivery app brands ― Woowa's Baemin and Yogiyo ― account for 99.2 percent of the market. That means the proposed acquisition, if allowed to proceed with no strings attached, will result in the birth of another entirely monopolized market.
The KFTC saw, rightly, that such a monopoly would reduce consumer benefits, such as promotions through coupon discounts, while raising commission rates for eateries. The damage to consumers and restaurateurs could become even more prominent, as the number of users is increasing sharply amid the prolonged COVID-19 pandemic. When it signed the $4-billion deal about a year ago, DH said it would not raise commission fees. In April, however, it tried to change commission collection from a fixed amount to a flat rate system before withdrawing it faced with strong opposition.
The commission's decision is significant by presenting a principle for corporate acquisitions or mergers within the online platform industry where market dominance quickly spreads to neighboring sectors. “We decided to permit the acquisition to create synergy while dispelling concerns about restricting competition,” KFTC Chairwoman Joh Sung-wook said. DH expressed some regrets about the conditional approval but showed its formal position of respecting the decision. We expect the company to lead the industry's innovation and stage fair competition, promoting consumers' rights and interests.