Germany-based Delivery Hero will concede its food delivery services Yogiyo as a cost of acquiring Woowa Brothers, the operator of market champion app Baemin, officials said Monday.
The apparently reluctant decision came after South Korea’s antitrust watchdog disapproved the monopolistic merger of the top two apps in the fast-growing food delivery market.
“We request that the Fair Trade Commission send the final notice in the first quarter next year,” the company posted on its website in the afternoon.
The statement, according to officials, indicates that the company embraces the regulator’s terms suggested earlier in the day.
“We fear that the merger of the two companies may restrain market competition and possibly infringe upon consumers’ rights through abuses of power such as service charge hikes,” said the FTC chief Joh Sung-wook in a press briefing.
The FTC thus gave conditional approval to the takeover, saying that DH has to dispose of Yogiyo, which is run by local subsidiary Delivery Hero Korea, within the next six months. DH is to maintain the asset value and service quality of Yogiyo at its current level until the sale procedure is complete.
Late last year, DH struck a deal to acquire an 88 percent stake in Woowa Brothers. The food delivery app market, valued at 10 trillion won ($9.12 billion) last year, has grown exponentially this year amid the COVID-19 outbreak and the resulting social distancing policies.
While the deal raised anticipations for potentially the largest-ever merger of a local internet-based business, it also triggered monopoly disputes as Baemin and Yogiyo accounted for a combined 97.6 percent of the domestic food delivery market.
“We have decided to attach the condition as the proposed acquisition would have an extensive impact on various stakeholders ranging from restaurants, delivery workers and consumers,” the regulator said in a statement.
The compromising scenario, according to the FTC, came in an effort to prevent market monopoly, without banning corporate decisions altogether.
Also, it is seen as reflecting the policymakers’ concerns over Baemin’s latest system breakdown which created havoc among restaurant operators and delivery workers for hours on Christmas Eve. The consequences of such system errors could be much more devastating under a monopoly, officials said.
“The respective market share of the corresponding (food delivery) companies has remained quite steady over the past five years, notwithstanding the appearance of new market enterers,” the watchdog also said.
Coupang Eats, the food delivery system of e-commerce platform operator Coupang, kicked off last year but its area of service so far remains largely limited to Seoul and the neighboring Gyeonggi area.
Last month, when receiving the preliminary report from the FTC, DH had said that it “does not consent” to selling Yogiyo, adding that it will continue to persuade the watchdog.
By Bae Hyun-jung (firstname.lastname@example.org