Deliveroo and Foodpanda offer to amend exclusivity deals with Hong Kong restaurants after competition watchdog warns of possible legal breaches
- Competition Commission says top two food delivery platforms in city ‘have each offered to make necessary amendments to their existing agreements’
- Watchdog had warned both companies could hinder competition by penalising partnering eateries working with rivals and imposing platform price limits
The top two food delivery platforms in Hong Kong have offered to ease the terms of their contracts with restaurants so smaller rivals can build market share after the city’s competition watchdog warned the deals might breach the anti-monopoly law.
The Competition Commission on Thursday said Deliveroo and Foodpanda contracts contained potentially problematic provisions such as charging partnering restaurants lower commission rates if they worked exclusively with either company and penalising those that operated with rival platforms.
The two companies also required restaurants to stay within their platforms’ pricing limits, the independent statutory body said, warning that both had a degree of market power and could hinder new or smaller businesses from making inroads, as well as reduce competition.
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But the commission said Deliveroo and Foodpanda had offered to amend their agreements with restaurants, ensuring venues would no longer lose out commercially if they worked with smaller platforms while also lifting pricing restrictions.
“Foodpanda and Deliveroo have each offered to make the necessary amendments to their existing agreements and communicate the changes to their respective partnering restaurants within 90 days after the commitments entered into force,” it added.
The proposal defined smaller platforms as those that did not currently have more than 10 per cent of the local market, covering companies such as Oddle, DimOrder and newcomer KeeTa, operated by mainland Chinese delivery giant Meituan.
The watchdog also invited interested parties to submit their views on the proposal before June 15, but did not elaborate on when it might approve the commitments after the consultation period ended.
“We think their suggested commitments are enough to relieve us of our concern towards the effects of these provisions, so the Competition Commission is keen on accepting these commitments,” it said.
Foodpanda and Deliveroo each control more than 40 per cent of the market, based on the total value of orders placed between 2016 and 2021, according to the watchdog.
By comparison, some smaller competitors had less than 1 per cent of the market, while others such as Uber Eats had stopped offering deliveries after struggling to establish themselves.
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The watchdog said it aimed to create an environment conducive to healthy competition, stressing it was not attempting to regulate the market nor targeting dominant players.
“It is not that we are targeting companies that have a large market share, it is only because these large companies have an anticompetitive effect on the market when they engage in these types of behaviours,” the commission said.
If the proposal was accepted, Foodpanda and Deliveroo would be required to uphold the commitments for three years or until the market share of either platform had fallen below 30 per cent for two consecutive months, the watchdog said.
But provisions preventing Foodpanda from restricting the prices of its partner restaurants on other platforms would continue to remain in effect, it added.
Ray Chui Man-wai, the president of the Institute of Dining Art, welcomed the suggested pledges, which he said would give the industry and consumers greater choice of platforms, as well as introduce more competition.
But Chui, also chairman of Kam Kee Holdings that operates about 44 restaurants, noted that an eatery’s decision to work with an additional delivery platform would depend on several factors, such as the costs involved, service area coverage and market share.
“I don’t have a decision yet on whether I will consider using another service provider,” he said. “I will think about whether I will want to add another platform to my restaurants after all the details have been settled. I would look at a few more players before I decide.”
Lawmaker Doreen Kong Yuk-foon, from the Election Committee constituency, said the commission had not done enough to tackle Foodpanda and Deliveroo’s monopoly of the food delivery market. She also expressed hope the Legislative Council and the watchdog could examine the dominance of technology platforms in other industries, such as taxis.
Foodpanda told the Post it would continue to cooperate with the commission, while Deliveroo said it would wait until the public consultation period was over before having further discussions with the watchdog.
