Oral reply to PQ on partnership with 3rd party food delivery companies

Question

Ms Foo Mee Har: To ask 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.

Oral Answer (to be attributed to Senior Minister of State for Trade and Industry Mr Chee Hong Tat)

1. 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.

2. 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 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.

3. 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, including insurance and payment for their delivery riders, as well as costs to develop and maintain the IT systems and databases.

4. 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. 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” group on social media. 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.

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

6. 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 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.

7. Mr Speaker, Sir. These are difficult times for our businesses. The government will continue to support our companies and workers. Our objective is to help viable businesses to survive the crisis and 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. 

8. 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 costs.  The Booster Package has benefitted more than 9,000 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 the Package till 1 June 2020.