Uncategorized

Any legislation to cap commission fees of delivery apps has to be ‘carefully’ considered: Chee Hong Tat

May 4, 2020

SINGAPORE: Amid concerns raised about high merchant commission fees charged by food delivery platforms, Senior Minister of State for Trade and Industry Chee Hong Tat said on Monday (May 4) that careful consideration needs to be made on whether legislation is the appropriate solution in this matter.

Noting that legislation can be “a rather blunt instrument”, he said a more effective way would be to create alternative options for food and beverage businesses and their consumers.

The possibility of new competitors, he said, would “serve as a check” against excessive commission rates and “produce a better outcome for all stakeholders compared to capping commission rates through legislation”.

“I understand the concerns of food services businesses, as the commissions they pay to food delivery companies will reduce their earnings. However, we need to carefully consider whether legislation is the appropriate solution in this situation,” he said in Parliament.

READ: As COVID-19 hits F&B sector, calls emerge for delivery apps to lower commission fees

Mr Chee was responding to a question from Member of Parliament Foo Mee Har, who had asked if guidelines or legislation can be considered to lower the commission fees charged to F&B players by third-party delivery platforms, so as to foster a “more equitable partnership”.

Ms Foo had made a similar point in Parliament last month, describing the “exorbitant” fees as “barely tolerable during peace time” and weighing on the survival of F&B establishments amid the COVID-19 pandemic.

Calls for lower rates, including a petition, have also emerged from the F&B sector over the past month, as businesses grapple with a sharp fall in revenue and become increasingly reliant on meal delivery services amid the “circuit breaker” rules. Under these enhanced safe distancing rules, F&B players can only offer takeaways and deliveries.

With the fees charged by the three biggest food delivery players in Singapore – foodpanda, Deliveroo and GrabFood – ranging from 25 per cent to as high as 40 per cent an order, F&B owners told CNA that these fees are “unsustainable” for them.

READ: Commentary: If we can share or hitch rides, why not food delivery?

Mr Chee said the Competition and Consumer Commission of Singapore has been monitoring different parts of the economy to guard against anti-competitive behaviour.

The third-party food delivery firms have said that their commission rates are in line with that charged before the start of the COVID-19 pandemic. Some of them have also offered assistance to merchants, such as removing on-boarding fees and waiving commission for self pick-ups, during the circuit breaker period, he added.

Mr Chee noted that these delivery platforms have also explained how their fees are required to cover business costs such as insurance and payment for the delivery riders, as well as costs to develop and maintain IT systems and databases.

“(Legislation is) a rather blunt instrument and what rate do you want to set?

“If you set it too low, one of the consequences would be that the food delivery companies will then not be able to provide some of these services because they have their costs to cover as well,” he said.

READ: COVID-19: Circuit breaker might be lifted when community cases fall to zero or single digits over sustained period

Mr Chee went on to stress that F&B businesses and consumers have alternative options.

Apart from the main food delivery platforms, there are vendors who can help F&B businesses to set up their own online storefront with co-funding support from Enterprise Singapore (ESG).

There are also ground-up initiatives, such as the Hawkers United – Dabao 2020 group on Facebook which allows hawkers to promote their menus, takeaway and delivery services for free.

F&B businesses can also decide if they want to do their own deliveries, tap on third-party logistics providers or have consumers pick up the food themselves.

“The availability of alternative options, including the possibility for new competitors to enter the market, will serve as a check against excessive commission rates and continue to incentivise delivery companies to provide value to businesses who are using their platforms and services,” he said.

Mr Chee added: “There are trade-offs among the different options, and market conditions will also evolve in tandem with changes in supply and demand.

“Hence, food services businesses should weigh the pros and cons of the different options before making a commercial decision on which one to choose.”

READ: ‘It’s about trying until our last breath’: New F&B players cook up survival plans for COVID-19 crisis

FOOD DELIVERY SUPPORT TO BE EXTENDED TO JUN 1

Mr Chee also told the House that a support package offering subsidies for F&B businesses offering deliveries will be extended to Jun 1, in line with the lengthened circuit breaker period.

First announced on Apr 4 by ESG, the Food Delivery Booster Package has benefited more than 9,000 businesses so far.

The package provides funding for 5 percentage points of the commissions charged by Deliveroo, GrabFood and foodpanda for orders delivered during the circuit breaker period.

For F&B businesses that use approved third-party logistics firms such as Lalamove and Zeek, ESG will also co-fund 20 per cent of the delivery costs.

This booster package was originally scheduled to end on Monday.

READ: Commentary: We are becoming a ‘dabao nation’ – why does it feel like a bad thing?

“In view of the extended circuit breaker period, ESG will continue to provide this package till Jun 1, 2020,” said Mr Chee.

“These are difficult times for our businesses. The Government will continue to support our companies and our workers.

“Our objective is to help viable businesses to survive the crisis and to prepare for the recovery, when we are able to gradually ease the restrictions and allow more economic activities to resume,” he said.