Businesses, gov't deliver blunt rebuke of Baemin's commission hike plan

The decision by Korea's No. 1 delivery service to hike its commission fee 3 percentage points has invoked criticism from both restaurants and the government.

A Baedal Minjok rider delivers takeout food [NEWS1]

The recent commission hike announced by Baedal Minjok, the country’s top food delivery service, is facing backlash from both small businesses and the government.

The delivery company, commonly known by its abbreviated name Baemin, announced Wednesday that it will hike the commission fee charged to restaurants and businesses that use its delivery service, Baemin 1, from 6.8 percent to 9.8 percent — a 44 percent increase — from August.

The hike will likely be at odds with the government's push to contain inflation to the low-2 percent range by the end of the year, as such an uptick could translate into an increase in the consumer price index (CPI) as dining out and food delivery accounted for 13.8 percent of the total CPI in July, according to Statistics Korea.

The timing of the hike raised eyebrows, coming a mere week after Economy and Finance Minister Choi Sang-mok called for “discussions regarding how delivery platforms should rationally decide on the delivery price and commission” while also offering financial support to small businesses under pressure from the fees.

“It is deeply regrettable that [Baemin] announced an increase in the delivery commission when the government just took a step toward decreasing delivery commission charges to help small businesses,” a top official from the Finance Ministry told the JoongAng Ilbo, an affiliate of the Korea JoongAng Daily.

“It’s like throwing water on the government-led plan.”

The price hike was met with even stronger negativity from restaurant owners.

“The one-sided increase in the commission fee by the No. 1 delivery service is causing anger among many small business owners,” The Korea Federation of Micro Enterprise (KFME) told the JoongAng Ilbo. “I take this as [Baemin] having no will to mutually coexist with small businesses.”

Baemin’s recent move can be attributed the 2019 acquisition of Woowa Brothers, the operator of the Korean delivery service, by the German company Delivery Hero, which may be prioritizing the retrieval of its investment over a fulfillment of social responsibility in Korea.

In fact, Baemin paid over 400 billion won ($290 million) to its parent company as an interim dividend out of the roughly 700 billion won in profit the service logged last year.

The German firm also warned that it may face a 400 million-euro ($433 million) fine by the European Union for breaching antitrust regulations, leading to speculation about the reason for the price hike.

“We have increased the commission fee to the standard industry level as we found it unsustainable to continue our service with the lower commission that we offer,” Baemin told the JoongAng Ilbo, adding that while the company increased the rate, it tried to “minimize the burden on restaurants by decreasing its delivery fee,” referring to its 400-won to 600-won price cut in the delivery cost imposed on businesses.

Restaurant owners, however, claim that such discounts are only temporary to sugarcoat the commission increase and will result in an increased burden.

“It is suspicious seeing food delivery platforms overly increasing commission costs based on their oligopoly-like status,” Ahn Dong-hyun, a professor of economics at Seoul National University, told the JoongAng Ilbo.

BY KIM MIN-JOONG, JANG JOO-YOUNG [cho.yongjun1@joongang.co.kr]