Will Delivery-App Fee Caps Help Korea’s Small Restaurants?

South Korea is considering caps on the fees that food delivery platforms charge restaurants, with the goal of improving restaurant profitability. But a lower fee on each delivery order does not guarantee a more profitable restaurant.

A bill introduced by opposition lawmaker Park Jeong-hoon would cap the combined costs of commissions, payment processing, advertising, and delivery at 15 percent of order revenue. This approach overlooks how the cap could negatively affect the services restaurants receive and the customers they reach. Korea Fair Trade Commission (KFTC) Chairman Joo Byung-ki has called for swift passage of special legislation for delivery apps and the proposed Online Platform Fairness Act, placing the fee-cap debate within a broader push for platform-specific regulation.

Delivery platforms have expanded the market restaurants can serve. Investments in digital ordering, payment systems, and delivery coordination help neighborhood businesses reach customers who might never walk through their doors. Restaurants gain access to capabilities that would be costly to develop independently. These services create economic value, and their continued development depends on viable business models. Policymakers should consider how price controls could affect this infrastructure for restaurant growth.

The broader profitability challenge also extends well beyond delivery fees. A government survey published in March 2026 put the restaurant industry’s operating profit margin at 8.7 percent in 2024, identifying rising labor and ingredient costs as major sources of pressure. These industry-wide findings do not isolate the effects of delivery apps. They underscore the importance of helping restaurants use resources more efficiently and strengthen their capacity for growth.

A fee cap changes how revenue is distributed without directly reducing the resources required to deliver a meal. Drivers still need time to collect and transport orders, while platforms must maintain payment systems and coordinate deliveries. Lower platform revenue could reduce funding for consumer discounts, service coverage, and technology investment.

Fee caps could also discourage platforms from developing new pricing models to manage supply and demand fluctuations. For example, incentives that encourage drivers to accept orders during periods of high demand could become harder to sustain if the cap limits the revenue available to fund them. Even rules preventing increases in other restaurant charges cannot guarantee that the same services will remain available on the same terms.

Including delivery charges in a percentage cap creates an additional mismatch. A 15 percent ceiling would limit restaurant charges to 3,000 won on a 20,000-won order and 6,000 won on a 40,000-won order. Delivering the cheaper meal over the same distance need not cost half as much. The ceiling could make smaller orders harder to serve economically, affecting restaurants selling inexpensive meals and consumers seeking affordable options.

Evidence from the United States illustrates why these broader effects matter. Researchers Zhuoxin Li and Gang Wang studied commission caps across 14 cities and states. Independent restaurants covered by the restrictions experienced lower takeout demand and lower net revenue than comparable restaurants in unregulated cities, while chains outside the restrictions’ scope gained. The researchers also identified changes in platform recommendations and higher consumer delivery fees. Korea’s nationwide proposals differ from these local restrictions, but the findings show how price controls can alter the flow of orders through a market.

Research also shows that outcomes vary. Economist Michael Sullivan’s model of the U.S. food delivery market finds that a 15 percent commission cap increases restaurant profits while reducing total welfare, and that more moderate caps can improve welfare. These results provide no ready-made justification for Korea’s proposed ceilings, which cover different services. They demonstrate why a lower restaurant fee alone is an insufficient measure of policy success.

Existing competition law provides a framework for addressing substantiated concerns about business conduct. Article 45 of the Monopoly Regulation and Fair Trade Act prohibits unfair exploitation of a superior bargaining position. Authorities can apply that provision when the evidence meets the legal requirements.

Case-specific enforcement, applied transparently and consistently to domestic and foreign firms, allows authorities to address unlawful conduct while preserving flexibility in how businesses price, develop, and offer services. ITIF’s recent analysis of KFTC penalties underscores the importance of these safeguards before expanding the commission’s authority over platforms.

Government support should concentrate on helping restaurants adopt technologies and practices that improve their operating efficiency and profitability. Inventory tools can help match purchasing to demand and reduce waste. Integrating ordering systems with accounting software can reduce administrative work and give owners a clearer picture of profitability. Training should help operators use this information to improve menus, assess sales channels, and identify opportunities to expand. Successful businesses should have room to grow and achieve greater scale.

Established programs offer a starting point. The government’s 2026 Smart Store Technology Dissemination Project already supports business-management and marketing software. Assistance should help restaurants use these tools effectively, with results assessed through operating cost savings and productivity gains. Voluntary shared purchasing could also help independent operators obtain some procurement advantages available to larger businesses.

Restaurant owners need ways to improve margins through greater efficiency and productivity. The National Assembly should reject delivery-app fee caps. Poorly designed price controls, adopted without a sound assessment of their broader effects, could weaken opportunities for growth. The KFTC’s push for additional platform-specific regulation also risks deepening friction with Washington. The November 2025 U.S.–Korea joint fact sheet explicitly commits both countries to preventing discrimination against U.S. companies and unnecessary barriers for those companies under policies concerning digital services, including online platform regulations.

South Korea’s government should address proven unlawful conduct through existing law and concentrate its support on reducing operating costs and helping restaurants become more competitive and grow.