Hong Kong’s burgeoning online food delivery market is set for a shake-up after the Competition Commission (ComCom) successfully engaged with platform giant Keeta regarding potentially anti-competitive contract clauses. The regulator found that certain provisions within Keeta’s restaurant agreements, operated by Kangaroo Limited, may suppress market rivalry and obstruct emerging delivery platforms from gaining a foothold or expanding operations. Following the authority’s scrutiny, Keeta has agreed to a phased approach for revising these contentious terms, aiming to foster a more dynamic and competitive landscape for the benefit of both restaurants and consumers.
Regulatory Scrutiny Targets Market Power
The Commission’s investigation centered on clauses that appeared to leverage Keeta’s significant market power in Hong Kong. Specifically, the regulator flagged several practices that potentially weakened competition. These included offering lower commission rates contingent on restaurants entering exclusive partnerships, imposing restrictions or penalties on establishments attempting to transition from exclusive arrangements to using multiple platforms, and—most crucially—preventing partner eateries from setting lower menu prices either through their own direct sales channels or on rival delivery applications.
ComCom contends that these pricing restrictions are particularly damaging to market competition. By effectively mandating price parity across platforms, new or smaller delivery services face barriers to entry and scaling up their business, as they cannot use competitive pricing to attract restaurant partners or customers. This lack of differentiation ultimately reduces competitive pressure across the sector.
Keeta Agrees to Phased Contract Amendments
In response to the identified concerns, Keeta committed to amending its agreements in two distinct phases. The first phase involves an immediate, voluntary revision of the problematic terms. Keeta has already begun informing its restaurant partners that these changes will be implemented imminently, yielding near-term benefits for the business sector and consumers.
The second phase will see Keeta submit formal, legally binding commitments to the Commission under Section 60 of the Competition Ordinance. This formal undertaking is crucial as it ensures the permanence and enforceability of the changes. The Commission stated that while the voluntary revisions are a sign of good faith and deliver immediate impact, a formal commitment is necessary to codify these amendments legally. Before accepting the formal undertaking, the Commission plans to launch a public consultation to gather feedback on the proposed revisions.
Implications for the Food Delivery Ecosystem
The removal or revision of these clauses is expected to significantly strengthen market competition. The Commission anticipates several positive outcomes:
- Increased Flexibility for Restaurants: Eateries will gain greater latitude in managing their pricing strategies externally, allowing them to offer different prices for dine-in, direct orders, or various delivery platforms.
- Enhanced Competition: Smaller and emerging delivery platforms will have broader opportunities for collaboration and growth, as restaurants are no longer penalized for “multi-homing” or prevented from offering strategic pricing elsewhere.
- Consumer Benefits: Greater competition often translates into improved service quality and potentially lower prices or more varied promotional offers for end-users.
The Competition Commission welcomed Keeta’s proactive approach, noting that the agreement to revise terms ahead of any formal enforcement action demonstrates an acknowledgment of the competition concerns. The watchdog affirmed it would continue to closely monitor the food delivery sector to ensure compliance and maintain competitive standards, ready to take further action if necessary. This successful engagement marks a critical step toward ensuring fair play and innovation in Hong Kong’s rapidly expanding online economy.