Baedal Minjok New Ads Fee System Anger Restaurant Owners

Baedal Minjok (Baemin) took flak after introducing a new commission system that restaurant owners argue would put a higher cost burden on them. South Korea’s top food delivery service operator restructured its fee system shifting from a flat-sum system to a fixed-rate commission system.

The restructure angered owners who claim that Baedal Minjok tries to abuse its monopoly over the market. Owners said that the company exploited small-sized restaurants implementing the new fee system amid the economic struggle due to the COVID-19 spread in the country.

Woowa Brothers Apologize

Following growing complaints against the implementation of the new system, Baemin’s operator, Woowa Brothers, issued an apology. It added that it would refund half the total amount that restaurant owners already paid for the use of its ad service this month.

Woowa Brothers explained it intended for the restructure to the only charge more those large restaurants dominating the ad exposure. They added that 52.8 percent of the platform users would benefit from the changes.

Kim Beom-joon, Woowa Brothers CEO, offered his sincere apology for adopting the new advertisement fee system. He added that they would improve and fine-tune the fee system as soon as possible. The company would also provide protective measures for those who would face the burden of additional ad costs.

FTC Weighs In

Meanwhile, FTC Secretary-General Kim Jae-shin said that Baemin’s attempt to change the commission system unilaterally displays the company’s dominating power. The food service delivery company is currently being investigated on a merger for possible market monopolizing.

The Fair Trade Commission said it would meticulously look into Baemin’s new fee system. The commission would also make sure that Baemin and Yogiyo properly manage collected customer data.

Open Service

The new ad system starting April 1, required restaurant owners to pay a fixed-rate commission of 5.8 percent per order made on Baemin’s app. Previously, restaurant owners mostly use the app’s “Ultra Call” advertisement service, which charges 88,000 won ($72) monthly.

With the flat-sum system, business owners could plant (buy) as many flags as they want on a virtual map, increasing their advertising revenues. The app would then recommend the closest restaurant to customers.

However, starting April 1, Baemin limited restaurants to plant a maximum of three flags. According to store owners, the new policy would force them to use Baemin’s new advertisement system, “Open Service.”

Baemin positioned the “Open Service” category before the “Ultra Call” section on the app’s interface. As customers often order with the first establishments appearing, store owners pay more to appear on the advertisement system, on top of their initial cost to plant flags.

The company said it lowered the commission fee for advertisements from 6.8 percent to 5.8 percent per order. However, store owners argue that the new structure would nearly double their ad costs.

Korea Franchise Association reported that Baemin has the lion’s share in the market with 55.7 percent. Yogiyo follows with 33.5 percent and Baedaltong with a 10.8 percent market share.