Food Delivery is one of the most popular and attractive industries during and after the spreading of COVID-19. It has grown due to changes in consumer behavior and investment by domestic and foreign food delivery platform operators. KResearch projects that the number of food deliveries for the whole year of 2020 will grow by up to 78.0-84.0 percent compared to the previous year. Although the growth of food delivery has expanded the revenue-generating channels for restaurants and other companies in the value chain, the commission fees for food delivery services are dominated by a few food delivery platform operators. Although there are many restaurants using food delivery platforms, there is no clear guideline or criterion for the standard of the service fee charged, so that food delivery platform operators can unilaterally amend the conditions of transactions with restaurants, and this in turn has an impact on the cost structure of restaurants, especially small restaurants with limited sales channels; therefore, restaurants have called on the government to increase supervision over this issue.
To this end, the Office of Trade Competition Commission (OTCC) made the following conclusions on October 15, 2020: 1) Further clarify the definition of food delivery platform operators; 2) Stipulate the regulations of food delivery platform operators’ trade practices that may cause losses to restaurant operators, covering the following areas:
• The rate of commission and additional fees charged to restaurants, such as advertising fees and commissions, which shall not be charged without necessity or prior notice.
• Restriction of the trading rights of restaurants, such as prohibiting the forcing of restaurants to use only one food delivery platform (exclusive dealing), etc. without necessity.
• Use of unfair bargaining powers, such as controlling or interfering in the pricing of goods, canceling the contract without reason or prior notice, and changing the validity period of the contract without a 60-day notice.
At present, the above-mentioned guidelines have been approved by the OTCC and will take effect after being published in the government gazette. KResearch expects that the above guidelines will not affect the operation of food delivery platform operators, because the operators have previously modified and relaxed the conditions, and after new players join the market and provide attractive conditions, old players must adapt to the changing circumstances.
However, the introduction of the guidelines is expected to help improve the standard of the food delivery industry, to avoid unreasonable disadvantage for players in the value chain, and to create an environment of free competition for all market participants, thereby giving benefits to restaurant operators and service platform operators. It is expected that in the future, the scope of the guidelines will be expanded to cover consumers and food delivery riders.
KResearch expects that the competition in the food delivery service industry over the remainder of 2020 through 2021 will become more intense, because old and new players will strive to capture a limited pool of consumers, and pricing strategies and information analysis capabilities will be adopted to meet rapidly changing customer behavior.
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