For suppliers operating in both the single-sided online platform and the intermediary online platform business models, the MyCC further observed that there are at least three business models adopted by the suppliers in the online platform business model, that is:
Foodpanda operates a food delivery service via an intermediary online platform. Under this business model, the platform allows customers to place orders from the restaurant of their choice and the suppliers to carry out the deliveries through delivery partners.
The MyCC identified that the delivery of food via an intermediary online platform:
The MyCC identified that there was an exclusivity clause in the Vendor Registration Form / Agreement utilised by Foodpanda.
The MyCC found that, if Foodpanda was dominant in the relevant market, then the existence of the exclusivity clause could induce merchants to subscribe to the Preferred Partnership Category to obtain a lower commission rate which created a lock-in effect for the merchants and disincentivised them from partnering with other food delivery platforms.
Evaluation
Section 10(1) of the Competition Act prohibits a dominant enterprise from engaging in any conduct which may amount to an abuse of dominant position in any market for foods goods of services.
Therefore, in order establish the infringement, the MyCC would need to ascertain:
In order to assess the effect of the imposition of the exclusivity clause on merchants in the Preferred Partnership Category, the MyCC determined that the relevant market was
“the intermediary online platform market that matches customers, merchants, and delivery partners for the provision of food ordering and delivery services in Malaysia”2 (the “
Relevant Market”).
As the Relevant Market had been determined by the MyCC, the MyCC then examined whether Foodpanda was dominant in the Relevant Market. In order to do so, the MyCC considered two potential bases of assessments.
The first basis of assessment was to determine market share by examining the individual annual reports of Foodpanda and its competitors to derive their revenue. The data from 2018 to 2021 showed that Foodpanda had a market share of 84.87% in 2018, 44.23% in 2019, 69.42% in 2020 and 76.14% in 2021.
3
The second basis of assessment was to determine market share by examining gross merchandise value (“
GMV”). GMV was determined by deriving the total value of services sold over a given period of time. The difference between determining market share based on revenue and GMV is that revenue figures are based on actual commissions earned from merchants whereas GMV includes all orders made on the platform regardless of whether they were successful or refunded.
GMV data from 2020 to 2022 showed that Foodpanda had a market share of 48% in 2020, 49% in 2021 and 38% in 2022
4, where in 2022, Foodpanda’s competitor: Competitor X had a 60% market share.
Under the MyCC’s Guidelines on Abuse of Dominant Position, the threshold stipulated to indicate dominance is more than 60%. The MyCC noted that, based on GMV basis, Foodpanda’s competitor, Competition X, had gained a market share of 60% which was almost twice the market share of Foodpanda.
After considering both the revenue and GMV bases of assessment, the MyCC said it was unable to ascertain that, in all probability, Foodpanda enjoys a dominant position in the Relevant Market.
5 While the MyCC recognised that Foodpanda had a significant market revenue, its relatively low GMV compared to Competitor X suggested that Foodpanda’s market power was vulnerable.
6 Accordingly, the MyCC concluded that it could not establish with certainty that Foodpanda enjoyed a dominant position in the Relevant Market.
As Foodpanda was not found to be dominant in the Relevant Market, the MyCC did not proceed with an assessment of the anti-competitive effects ensuing from the imposition of the exclusivity clause on merchants in the Preferred Partnership Category.
Conclusion
While the MyCC had made a finding of non-infringement under section 39 of the Competition Act, Foodpanda is not out of the woods yet. This is because after the conclusion of the investigation, the Commission collaborated closely with the MDTCA to proactively address the challenges within the food delivery services industry by implementing certain counter-proposals made by the MDTCA (endorsed by the MyCC).
7
As part of the Decision, the MyCC had invoked its powers under sections 16(h) and 17(i) of the Competition Commission Act 2010 (“
Competition Commission Act”) which respectively empower the MyCC to collect information for the performance of the MyCC’s functions, and to do all things necessary to perform its functions, to require Foodpanda to furnish a progress report to the MyCC within three months from the date of the Decision. The MyCC had also stated that it would continue to monitor the market independently with a specific focus on addressing any competition related matters.
Postscript
On 21 September 2023, Foodpanda’s parent company announced that it was in advanced talks on a partial sale of its Asia business, which included Malaysia, to Singapore’s NASDAQ-listed Grab Holdings Limited.
8 Grab operates one of the most widely used superapps in Malaysia and provides services ranging from mobility to deliveries which include services in matching customers, merchants, and delivery partners for the provision of food ordering and delivery services.
On 23 September 2023, the MyCC commented on the report of the potential sale of Foodpanda’s Malaysian business to state that it
“believes that the local food delivery industry will not have a monopoly, it is just that Grab will gradually become a "Big Mac" in the industry”.9 In an interview with the Nanyang Siang Pau, the Chief Executive Officer of the MyCC stated that
“Grab is expected to enjoy a dominant position after becoming a giant, which means that it has a "special" responsibility to consumers”.10 He further stated that
“after acquiring Foodpanda, Grab still has other competitors in the food delivery industry, including Shopee Food, Beep It and Baijia Food Delivery, which provide localised services, so there will be no monopoly situation.”11
It is pertinent to note that unlike many other jurisdictions, Malaysia currently has no merger control provisions under the Competition Act which require regulatory approval for mergers which may have a material effect on the relevant market. Therefore, regulators often have to monitor the market post-merger to determine if any anti-competitive infringements have taken place before any action may be taken.
It was stated in a recent article that GrabFood, with its 60% market share, is in a dominant market position in the food delivery business in Malaysia. With Foodpanda having a 38% share in the same market, Grab may have a 98% market share of the food delivery business in Malaysia if the acquisition goes through. The article noted that the Chief Executive Officer of the MyCC has stated that the MyCC is monitoring the situation as it does in markets where there are either supra-dominant or monopoly players, and that Grab’s expected supra-dominant role means it must adhere to the true spirit of competition so that it will not abuse its position.
12
Case Note by Tan Shi Wen (Partner) and Manshan Singh (Partner) of the Competition Law Practice of Skrine.