Proposal for Guidelines to be Given to Third Party Food Delivery Companies to Charge F&B Businesses Smaller Commissions

28 Ms Foo Mee Har asked the Minister for Trade and Industry whether guidelines or legislation can be considered to enable restaurants to pay smaller commissions and foster a more equitable partnership with third party food delivery companies.

The Senior Minister of State for Trade and Industry (Mr Chee Hong Tat) (for the Minister for Trade and Industry): Mr Speaker, Sir, 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.

The Competition and Consumer Commission of Singapore (CCCS) has been monitoring the developments in different sectors of our economy, to guard against anti-competitive behaviour. In the case of third party food delivery companies, they have explained publicly that their commission rates are in line with those charged before the start of the COVID-19 pandemic. During the Circuit Breaker period, some of these companies have offered assistance to restaurants and hawker stalls, such as removing on-boarding fees, waiving commission for self-collection orders and charging zero commission in the first month for businesses that are new to the platform.

Third party food delivery companies offer food ordering, delivery and payment services. They are also aggregators that offer food services businesses access to their customer networks. The food delivery companies have explained that their commission rates are required to cover their business costs. These include insurance and payment to their riders, as well as costs to develop and maintain the IT systems and databases.

Sir, one important factor is that there are alternative options available to food services businesses and consumers, if they do not wish to go through the food delivery companies. There are vendors who can help food services businesses to set up their own online storefront, with co-funding support from Enterprise Singapore (ESG). There are also ground-up initiatives to help food establishments publicise their products and reach out to consumers directly. One example is the "Hawkers United – Dabao 2020". This is a group that was formed on social media to help hawkers. In addition, food services businesses can choose how the food reaches consumers. This includes self-collection by consumers, delivery by the food services businesses themselves, and using the services of third party logistics providers. Some food outlets offer a combination of these options.

There are trade-offs among the different options, and market conditions will also evolve in tandem with changes in supply and demand. Third party food delivery companies may charge higher commission rates, but they can offer end-to-end services and access to a larger consumer base. So, there are trade-offs. Hence, food services businesses should weigh the pros and cons of the different options before making a commercial decision on which one they want to choose.

This approach will produce a better outcome for all stakeholders compared to capping commission rates through legislation. The availability of alternative options, including the possibility of new competitors entering 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.

Mr Speaker, Sir, 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 this crisis and to prepare for the recovery, when we are able to gradually ease the restrictions and allow more economic activities to resume. We have various schemes in place to help our companies and workers, covering different areas such as workforce training, productivity improvement and adoption of digital solutions. Our businesses who need assistance can approach Enterprise Singapore and the Trade Associations and Chambers and we will do our best to help them.

One example is the Food Delivery Booster Package by ESG to fund five percentage points of the commission charged by Deliveroo, foodpanda and GrabFood. The objective is to reduce the costs for food services businesses which are using these online platforms. For food services businesses that choose to go through approved third party logistics partners to deliver meals to their customers, ESG will assist them by co-funding 20% of the delivery cost that they are paying to these third party logistics providers. The Booster Package has benefited more than 9,000 food services businesses so far. It was originally scheduled to end on 4 May. In view of the extended Circuit Breaker period, ESG will continue to provide this Package till 1 June 2020.

Mr Speaker: Ms Foo.

Ms Foo Mee Har (West Coast): Thank you, Speaker. I would like to thank the Senior Parliamentary Secretary for the very comprehensive answer on what help the Government is providing through ESG. Nevertheless, I would like to bring back the point on the 30% to 35% commission charged by GrabFood, Deliveroo and foodpanda in the market. They have a dominant share and continue to have a dominant share during this COVID-19 period and there has been a lot of feedback from F&B outlets whether help can be given to them.

What I would like to ask Senior Parliamentary Secretary is whether the Government has monitored the size and growth rate of the delivery platform business, especially since the COVID-19 outbreak. Whether the Government feels legislation should be necessary to govern the practice of such businesses – I would say they are very large now – to avoid predatory behaviour as well as provide transparency, some kind of format that they have to provide transparency to the consumers to show how much the delivery companies charge restaurants and pay the delivery riders. I think that form of transparency is important. The same practice has been imposed on banks. When banks charge commission, we compel the banks to share with the customers; it would be similar thinking along that line.

I would also like to ask Senior Parliamentary Secretary whether the Government will consider temporary measures to limit commissions charged by delivery platforms – maybe just temporary – during this COVID-19 pandemic, where restaurants dine-in operations are not allowed. If we do not do a permanent arrangement, can we do a temporary one, so as to provide these restaurants a fighting chance to survive?

A number of cities in the US, including San Francisco and Seattle, have already passed Emergency Orders temporarily capping delivery app commissions at 15%. And there are many other cities in the process of doing so.

Mr Chee Hong Tat: Speaker, Sir, when we assess the policy options, I think it is important that we look at the incentives that these policies will create and the outcomes that they are likely to produce and not only on the intent of the proposal. So, we may have good intent when we suggest certain policy changes using legislation, but it does not mean that good intent alone will produce positive outcomes. I think that is something which we have to be quite careful in deciding what option we want to take to tackle the problem.

In my main reply, Sir, I mentioned that an effective way of dealing with this issue is to create alternative options so that you give businesses and consumers choice. And that is a check against anyone – whether it is GrabFood, foodpanda, Deliveroo or any other company – being able to charge excessive commission rates.

So, this is what we have been trying to do. To reduce the entry barrier to help companies that want to seek out alternative options. These options can include having customers pick up their own food. It can include the food services companies working with a third party provider to deliver the food on their behalf. It can also include them doing the delivery to customers on their own.

I think this is the approach that will produce a better outcome compared to using legislation, which 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 would then not be able to provide some of these services because they have their costs to cover as well. And they have explained what cost component goes to who – how much of it goes to the riders, how much of it for insurance, supporting the IT systems and maintaining the customer databases. So, yes, I think we do need to keep an eye on making sure that the system is fair, making sure that there are sufficient alternative options. But in the end, I think we should place our focus on what is the outcome that we can achieve.

Mr Speaker: Ms Foo Mee Har.

Ms Foo Mee Har: Thank you, Speaker. I believe I have made my point. Actually, I would like to speak by apologising to the Senior Minister of State. I had mentioned "Senior Parliamentary Secretary"; it is actually "Senior Minister of State". I have made my point, so I will not repeat myself. Thank you.