South Korea penalizes delivery apps: how matching prices can blunt competition

A delivery app can charge a restaurant less without bringing you a cheaper dinner. If cutting the menu price there means matching that reduction on a bigger app with higher fees, the restaurant faces a costly choice.

That is the pricing problem South Korea’s competition regulator described on November 9, announcing provisional penalties of 331.1 billion won against Woowa Brothers, Baemin’s operator, and 300.8 billion won against Coupang, which operates Coupang Eats. The Korea Fair Trade Commission made the decision on October 29. Both companies dispute its findings. The commission’s release sets out the conduct and corrective orders.

The case concerns who gets to decide a restaurant’s terms—and whether a smaller app can turn lower charges into an attractive reason for customers to switch.

The catch in an equally good price

The requirements carried an imposing name: “most-favored-nation” terms. Here, that meant restaurants had to offer conditions at least as favorable as those available on competing apps.

According to the commission, Coupang enforced requirements covering six conditions, including menu prices, minimum order amounts, discounts and customer delivery charges, from July 2023 through January 2026. Restaurants that failed to comply could lose their “Wow restaurant” designation, which made orders eligible for membership benefits.

Baemin imposed similar requirements covering three conditions from May 2024 through October 2025. Noncompliant restaurants were excluded from Baemin Club store status and its associated customer delivery-fee discounts. The regulator said losing access to these benefits brought substantial sales losses, pressuring restaurants to comply. Yonhap’s account describes both arrangements.

A promise that one app’s customers will receive equally favorable terms can sound reassuring. The commission’s objection was that these requirements also obstructed cheaper offers elsewhere.

Follow a hypothetical meal

Consider an imaginary restaurant selling a 10,000-won meal. App A charges a hypothetical 10% commission; app B charges 5%.

The restaurant could cut its price on B to 9,500 won, saving the customer 500 won while retaining slightly more after commission than on A:

Each receipt is simply the menu price multiplied by the share left after commission: 9,500 × 0.95 = 9,025, for example.

If A requires an equally favorable menu price, the restaurant cannot keep the cheaper offer confined to B. Matching it on A reduces receipts by 450 won on every A order compared with the original price. Keeping both prices at 10,000 won avoids that reduction.

These are illustrative numbers, not the companies’ actual commission schedules or measured restaurant behavior. Other fees, taxes and delivery charges are excluded, with other costs held constant. The example shows why a lower commission creates room for a price cut without ensuring that diners receive one.

It also separates three different amounts: the menu price, the commission paid by the restaurant and any delivery discount received by the customer. A discount on delivery does not establish that the food itself is cheaper.

What the companies contest

Coupang argues that its policy supported reasonable prices and free delivery while helping participating restaurants increase sales. Woowa Brothers says it explained that its conduct was lawful and will review the written decision. Those are the companies’ positions, reported by Chosunbiz.

Coupang also says unrelated revenue inflated the penalty calculation and that the sanction was excessive; it plans a legal challenge, according to Reuters. Reuters lists its penalty as 300.9 billion won, differing from the provisional 300.8 billion in the official release and Yonhap.

Baemin’s total covers more than matching terms. The commission also sanctioned what it found was forced switching from restaurant-arranged delivery to Baemin-operated delivery, and misleading delivery-time advertising.

The announced remedies prohibit the favorable-treatment requirements and forced delivery switching. A separate October 27 decision requires Coupang to amend terms charging restaurant commissions on prices before restaurant-funded discounts, within 60 days of receiving the order.

The commission expects greater freedom for restaurants to set different terms across apps. That could give a lower-fee rival more room to compete through cheaper meals. It does not guarantee price cuts: the hypothetical restaurant could also keep its menu unchanged and retain the saving.

Sources

• Korea Fair Trade Commission: findings, dates, provisional penalties and remedies
• Yonhap: penalty amounts and membership requirements
• Reuters: company objections and planned legal challenge
• Chosunbiz: both companies’ responses