The Peninsula

Local Governments Further Expand Their Policy Scope

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• In early April, the operator of South Korea’s biggest food delivery application “Baedal Minjok (Baemin)” began charging restaurant owners and franchisees a 5.8 percent commission for every online order.
• Gyeonggi Province Governor Lee Jae-myung criticized Baemin and pushed for the launch of a public food-delivery app that would benefit delivery workers, restaurant owners, and app engineers. Many local governments announced similar plans to develop a public delivery application.
• In March, the southwestern city of Gunsan launched a public food-delivery app that does not charge restaurant owners commission, advertising, or subscription fees.

Implications: The COVID-19 outbreak has created an environment where local governments can expand their policy toolkit and intervene in the market as a direct competitor to private companies. In response to fee increases on the delivery app Baemin, many local governments have indicated their intention to develop a competing platform. This proactiveness is consistent with other recent measures taken by local governments to boost consumer demand. Most notably, authorities have been issuing local currency to bolster demand and mitigate the economic fallout anticipated from the spread of COVID-19.

Context: Local government intervention in the delivery service was helped by growing public opinion that opposes Baemin’s growing market power. Currently, the Fair Trade Commission is reviewing whether to approve the merger of Baemin by the German company Delivery Hero, which operates food delivery applications Yogiyo and Baedal Tong. If the three companies come under a single banner, this company would account for 99 percent of the delivery app market in South Korea.

Korea View was edited by Yong Kwon with the help of Gordon Henning, Soojin Hwang, Hyungim Jang, and Ingyeong Park.

Picture by user Kimhs5400 from Wikimedia Commons