Legislative Push for Delivery App Fee Caps Gathers Steam Amid Cost-Shift Concerns

▲ Delivery riders

Discussion between rivaling parties on legislation to cap or lower the commission fees that delivery app platforms charge partner restaurants is expected to gain serious momentum following the parliamentary audit.

According to the National Assembly today (October 11), three bills concerning delivery app fees are currently pending before the National Assembly's Political Affairs Committee. These include separate establishment bills proposed by Democratic Party lawmakers Lee Kang-il and Kim Nam-keun, and an amendment to the Fair Trade Act proposed by People Power Party lawmaker Park Jeong-hoon.

The bill proposed by Rep. Lee limits the total sum of brokerage fees, payment processing fees, and advertising costs to within 15 percent of order sales, while placing separate upper and lower limits on delivery fees.

Rep. Kim's bill includes provisions to apply preferential commission rates to micro and small-sized partner merchants.

Rep. Park's bill centers on capping the total sum of brokerage fees, payment processing fees, advertising costs, and even delivery fees within 15 percent of order sales.

While the Democratic Party has actively pursued fee cap legislation primarily through its Euljiro Committee, the People Power Party has maintained a cautious stance.

However, the People Power Party is reportedly shifting its stance toward discussing the related bills recently.

A Democratic Party official stated, "The government is also in the mood to push for a delivery platform law," adding, "The People Power Party's position is to submit the bills to the bill review subcommittee for deliberation after the parliamentary audit concludes."

Once the Political Affairs Committee begins reviewing the related bills after the audit, legislative discussions are projected to accelerate within the year.

Previously, Fair Trade Commission Chairperson Joo Byung-ki remarked during a press conference last month marking his first anniversary in office regarding delivery app fees, "The burden on partner merchants, including advertising fees, is excessive, and the overall burden needs to come down," adding, "Regulatory authorities can play a role regarding excessive pricing."

Franchise owner organizations maintain that the introduction of a fee cap is necessary.

The Democratic Party's Euljiro Committee, alongside lawmakers Lee Kang-il and Kim Nam-keun, held a seminar last month on September 11 at the National Assembly Members' Office Building titled "Cases of Unfair Practices and Damage by Delivery Apps and the Direction for Introducing a Fee Cap."

Kim Jin-woo, co-chairperson of the National Franchise Owners Association, argued at the seminar, "A reasonable cap must be established on the total cost, including brokerage fees, payment processing fees, and delivery fees borne by merchants," and emphasized, "Fair sharing criteria must be established so that the costs of free delivery are not excessively concentrated on partner restaurants."

Concerns have also been raised that a fee cap could shift the platform's cost burdens onto other market participants or diminish market efficiency.

At a seminar on the "Delivery App Fee Cap" hosted by the Korea Association of Commodity Science and Technology on October 2, Kim Tae-young, a professor of global logistics at Chung-Ang University, pointed out, "If the commission rate cap is lowered artificially, costs could shift to other areas due to the characteristics of the platform ecosystem."

Prof. Kim also stated, "If consumers simultaneously cut back on delivery and dining out and shift toward eating at home, demand across the entire dining-out industry could contract."

Lee Gong, a research fellow at the Korea Development Institute (KDI), also pointed out during a seminar on the "Issues of Platform Commission Regulation" co-hosted by the Korea Telecommunications Policy Society and the Korea Competition Law Association on September 30, "A priori direct regulations such as fee caps need to be approached with caution," adding, "Due to the characteristics of online platforms, the possibility of evading regulations is high, and the likelihood of hindering market efficiency is significant."

Kim Sun-joo, a specialist member of the National Assembly's Political Affairs Committee, evaluated in a legal bill review report that the related bills are "meaningful in that they prevent delivery platform operators from abusing their positions and alleviate the commission burden on partner merchants."

The intent is to prevent unreasonable practices where platforms set excessively high fees or pass on promotional costs for free delivery to partner merchants through fee regulations.

However, specialist member Kim pointed out, "Since concerns over market dominance expansion and unfair trade are not issues limited solely to delivery platforms, it is necessary to examine whether it is appropriate to regulate only delivery platforms through separate legislation."

Kim also stated that opinions suggesting certain regulations may violate the principle of prohibition of excessive interference, freedom of business, and market economy principles must be taken into consideration.

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