Some online food delivery providers are offering exclusive tie-ups with restaurants, but Singapore's competition watchdog has flagged this as a potential concern.
If a provider becomes dominant, this practice could allow it to shut out smaller players - in breach of Singapore's competition laws, it said yesterday.
For now, the Competition Commission of Singapore (CCS) is not taking action as the fledgling food delivery industry is "vibrant" with new entrants competing aggressively. But it will continue to monitor the market closely "as such exclusive agreements can be problematic in future", it added.
Online food delivery providers have proliferated here over the past year, with services including Deliveroo, FeastBump, Foodpanda, Gourmet To Go and UberEats.
One provider has been investigated by the CCS after complaints of alleged anti-competitive practice.
The "sizeable player", which was not named, was found to have entered into exclusive agreements with certain restaurants, which prevented the eateries from using other providers.
After investigations began, the provider stopped introducing exclusive agreements.
But others have been using such agreements to gain market share, said the CCS.
The CCS ceased its investigation as it found such agreements have not harmed competition. CCS chief executive Toh Han Li noted fierce competition, with "market shares changing significantly".
However, if a provider does become dominant, then having such exclusive agreements risks infringing competition law, he added.
If the law is infringed, CCS can impose penalties of up to 10 per cent of a firm's turnover for each year of infringement, up to a maximum of three years.
One likely indicator of dominance is a market share of 60 per cent or above, said the CCS in response to queries. It also looks at other factors such as barriers to entry and buyer power when deciding if a firm is dominant.
There are no available estimates of market share, but bigger players include Foodpanda and Deliveroo.
Foodpanda, which lists over 1,300 restaurants, has exclusive contracts with some, such as seafood chain Manhattan Fish Market. Foodpanda did not confirm or deny if it had been investigated.
For burger joint MEATliquor SIN, having an exclusive contract with Deliveroo comes with being a franchise of British chain MEATliquor, which uses Deliveroo in Britain.
Some restaurants argue that exclusive tie-ups have their advantages.
Vietnamese eatery Pho Stop went exclusive with Deliveroo after using it for a while. Said owner Bryan Wong: "Even if I didn't have an exclusive agreement, I would still stick with one company."
Using multiple delivery providers could risk mix-ups, he said.
Deliveroo confirmed that it was not the firm in the CCS statement.
"If some restaurants believe that they can benefit further through exclusive arrangements, we work with them on those arrangements," said a Deliveroo spokesman, adding that most of its 1,700 partners are not on exclusive terms.
One delivery service without exclusive agreements is What to Eat, which has more than 200 partners.
Said business development director Nikola Rudic: "We know of the existence (of such agreements) because we have encountered some issues before when approaching restaurants."
This article was first published on August 26, 2016.
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