1st June 2023 – (Hong Kong) The Competition Commission in Hong Kong has launched a consultation on proposals by Foodpanda and Deliveroo to amend exclusive partnership agreements with their restaurant partners. The move comes after an investigation by the commission found that certain conditions in those agreements may harm competition and violate the Competition Ordinance’s First Conduct Rule.
The agreements include provisions that enable Foodpanda and Deliveroo to charge restaurants lower commission rates if they work exclusively with the respective platform, and penalise restaurants that switch from exclusive partnerships to working with other platforms. The agreements also restrict restaurants from offering lower menu prices on their direct channels and competing online platforms. Additionally, Foodpanda requires restaurants that use its food delivery services to also use its order-to-pickup services.
According to the commission, these conditions may hinder entry and expansion by new or smaller platforms and soften competition in the market, thereby depriving restaurants and consumers of the benefits of effective competition.
To address the commission’s concerns, Foodpanda and Deliveroo have each offered to amend the terms of the exclusive partnership so that restaurants can partner with new and smaller platforms without losing the commercial incentives entitled to only working with Foodpanda or Deliveroo. The two platforms would also make it easier for restaurants to switch away from working exclusively with either Foodpanda or Deliveroo and partner with other online food delivery platforms and would allow restaurants to charge lower menu prices on their own channels and other food delivery platforms. Additionally, Foodpanda has offered to allow restaurants the freedom of whether or not to use its order-to-pickup services.
The proposed amendments would last for three years from their effective date, with reporting and monitoring mechanisms in place to ensure compliance. The consultation on the proposed amendments is open to the public until 6pm on 15th June.
In response to the consultation, a spokesperson for Deliveroo said that they are committed to supporting all sides of the marketplace, including their partner restaurants, riders, and consumers. Deliveroo has proposed voluntary commitments that are now being consulted on, and they will wait for the public consultation to end before re-engaging with the commission.
The Competition Commission’s investigation and subsequent consultation highlight the need for fair competition in the online food delivery market. The proposed amendments by Foodpanda and Deliveroo aim to address the commission’s concerns and promote fair competition in the market, allowing new and smaller platforms to enter and expand their businesses while providing benefits to restaurants and consumers.
Meanwhile, in May this year, Meituan, a leading technology-driven retail company in China, has introduced a new food delivery brand called KeeTa, which is officially launching in the Hong Kong market. The move is intended to provide residents with more customised, efficient, and reliable delivery services.