South Korean restaurant owners voice concerns over $4 billion Delivery Hero deal

SEOUL (Reuters) - South Korean restaurant owners expressed concern on Monday over food delivery giant Delivery Hero’s proposed $4 billion acquisition of its local rival, saying the move could undermine competition and lead to higher fees.

FILE PHOTO: The Delivery Hero headquarters is pictured in Berlin, Germany, June 2, 2017. The Berlin-based company Delivery Hero, one of Europe's largest internet start-ups. Picture taken June 2, 2017. REUTERS/Fabrizio Bensch

Delivery Hero, the second-largest food delivery app operator in South Korea, said last month that it agreed to buy larger rival Woowa Brothers backed by Goldman Sachs in a deal subject to antitrust approval.

The combination of the two giants would create an entity with a combined market share of nearly 99% in food delivery apps, according to data from mobile big data platform IGAWorks.

Restaurant owners, already struggling with the slowing economy, raised concerns that the dominant player would raise commissions that it charges restaurant owners for taking orders via their apps.

“The biggest problem is that the companies can move the market to whatever direction they want to,” said Kim Kyung-moo, who runs a franchise restaurant, said at a news conference at the parliament.

Restaurant owners, food delivery riders and lawmakers urged the fair trade commission to thoroughly review the potential merger, which they said could also limit consumer choices.

A spokesman at Woowa Brother told Reuters that the firm is not planning on increasing commission fees.

South Korea, with a dense population and high smartphone use, is the world’s fourth biggest market for online food orders, with an annual value of $5.9 billion.

Berlin-bgased Delivery Hero last week submitted an application to the Korea Fair Trade Commission (KFTC) for an approval, an official at the antitrust regulator said, declining to comment further as a review is in progress.

In 2009, the watchdog approved U.S. online commerce firm eBay Inc’s deal to acquire local rival Gmarket in South Korea on the conditions that there would be a ban on raising sales commissions for the next three years.

Reporting by Heekyong Yang; Editing by Hyunjoo Jin & Kim Coghill