Digital platforms in focus: Antitrust insights from Mainland China and Hong Kong scrutiny of food delivery platform – Part 3

Part 3: Strategic compass: lessons and recommendations for companies operating on the vertical supply chain or managing platform businesses

1. Assessment of market power and impact on the market

Understanding the potential 30% market share threshold

In the Foodpanda/Deliveroo case, one of the conditions to relieve them of their commitments to the Hong Kong Competition Commission (HKCC) is if their respective market share falls below 30%, which would suggest lower market power in a more competitive and fragmented market. This indicates that the HKCC considers that with market share below 30%, vertical restrictions are not presumed illegal under Hong Kong competition rules.

The 30% threshold to some extent aligns with practices in other jurisdictions¹1:

Cumulative effect of parallel networks will matter

Cumulative foreclosure in vertical agreements can occur even without dominant individual market shares. In the Foodpanda/Deliveroo case, the HKCC noted that smaller platforms faced foreclosure partly because Foodpanda and Deliveroo’s exclusive arrangements collectively controlled a significant share of the market. For instance, in January 2022, about half of the market was tied to their terms.²2

This finding aligns with established competition principles. For instance, the EC’s De Minimis Notice—which provides guidance on when agreements are considered to have a negligible effect on competition—sets out that:

• When both of each party to a vertical agreement have market shares below 15%, their agreement typically has no appreciable effect on competition. However, this threshold drops to 5% when parallel networks of similar agreements exist.³3
• Cumulative foreclosure effects unlikely if less than 30% of the relevant market is affected by such parallel restrictive networks.⁴4

This approach confirms that despite parties to vertical agreements holding moderate market shares (c. 30% or less), foreclosure effects become increasingly probable when these restrictions collectively cover a substantial portion of the market.

2. Strategically navigating vertical exclusive arrangements

Vertical exclusive agreements can create market foreclosure effects, but remedies for addressing these concerns can vary materially based on how competition authorities assess such arrangements.

When unilaterally imposed by a dominant firm or firm with substantial market power

When a dominant firm or a firm with substantial market power unilaterally imposes exclusivity, competition authorities evaluate it under abuse of dominance rules (Article 22 of the Anti-Monopoly Law (AML) in Mainland China; Second Conduct Rule (“SCR”) of the Competition Ordinance (“Ordinance”) in Hong Kong). This typically results in strict enforcement:

• In the Meituan case, China’s State Administration for Market Regulation (SAMR) prohibited Meituan’s exclusive agreements with restaurants outright.⁵5
• Similarly, in the recent EU Corning case, Corning offered to remove all exclusivity arrangements to address European Commission concerns.⁶6

When implemented by a non-dominant firm or firm without substantial market power

When firms without dominance implement exclusivity through negotiated agreements (despite potential bargaining power differences), authorities typically assess these under vertical agreement rules (Article 18 of the AML; First Conduct Rule (“FCR”) of the Competition Ordinance):

• In the Foodpanda/Deliveroo case, the HKCC adopted a more nuanced approach rather than an outright ban⁷7:
  
• Since exclusivity in vertical agreements generally is not considered a “hardcore” restriction (with exceptions), there can be greater flexibility to negotiate remedies that address competition concerns while preserving benefits, as shown in the Foodpanda/Deliveroo case.⁸8

A worth-noting point from the Foodpanda/Deliveroo case is that the HKCC reviewed it under the FCR rather than the SCR, despite Foodpanda’s reported 60% market share in mid-2023 – a level that can trigger dominance presumptions in other jurisdictions.⁹9

This approach likely reflects that coverage of the exclusivity schemes did not reach foreclosure levels.¹⁰10

HKCC does not deem market share as the only or most significant indicator to assume monopoly market power. Here, Foodpanda and Deliveroo effectively restrained each other’s competitive behaviour to secure exclusive partnerships with restaurants, demonstrating that competition existed between them despite their market positions.¹¹11

3. Narrow price parity clauses under the microscope

Unlike wide price parity clauses that are generally considered anti-competitive by competition authorities, narrow price parity clauses have received more nuanced treatment.

Some competition authorities found narrow price parity not anti-competitive or even pro-competitive. For example:

• In HKCC’s 2020 travel agent case, narrow price parity clauses were deemed pro-competitive.¹²12
• UK Competition & Markets Authority(“CMA”)’s 2014 private motor insurance case: narrow price parity clauses in this case were found unlikely to impede competition.¹³13
• 2015 hotel agent investigations by multi-jurisdictions into Booking.com (“Booking”): France, Italy and Sweden accepted Booking’s commitment to replacing wide price parity with narrow price parity.¹⁴14

However, opposition to narrow parity clauses has existed and grown. In the Foodpanda/Deliveroo case, the HKCC found that narrow price parity clauses have actual effects on preventing restaurants from offering better prices on other platforms.

Similarly, Germany’s competition authority banned Booking’s narrow price parity clauses, a decision upheld by German Federal Supreme Court which found the narrow price parity set by Booking restricts the ability of hotels to offer lower prices to consumers who book directly on hotel portals.¹⁵15

Last September, the European Court of Justice (ECJ) also delivered a preliminary ruling clarifying that Booking’s price parity clauses (including both wide and narrow price parity) are not objectively necessary for the implementation of Booking’s online hotel booking platform.¹⁶16

We consider that differing enforcement stances on narrow parity clauses can be influenced by several factors beyond general variation in competition authorities’ approaches. Key considerations include:

1. Market practice:

The relevance of narrow price parity clauses can depend on how suppliers distribute their products:

• Suppliers that rely heavily on direct sales (e.g. those with strong brand recognition and customer loyalty) are less affected by narrow parity clauses. Even without such clauses, they are unlikely to offer lower prices on third-party platforms, as direct sales—being their primary channel—are often more profitable.
• Suppliers that depend more on distributors (e.g. those using third-party platforms as key sales channels) are more constrained by narrow parity clauses. If offering lower prices to certain distributors, they cannot lower prices on their own platforms as they are bound by narrow price parity obligations. In these cases, such clauses can restrict competition by preventing suppliers from undercutting their own direct sales, having an actual effect from wide price parity.

This distinction helps explain different enforcement outcomes in cases such as the UK CMA’s 2014 private motor insurance case and Hong Kong’s Foodpanda/Deliveroo case.

2. Customer behaviour

Consumer habits also play a significant role in the impact of narrow parity clauses:

• Food delivery platform users tend to stick to one or two platforms since meal prices are relatively more affordable, and the savings from comparing prices across multiple platforms are not significant.
• Hotel booking platform users, on the other hand, are more likely to compare prices across multiple sites due to the higher cost of accommodations, making it worthwhile to shop for the best deal.

Because food delivery customers are less likely to switch platforms for small savings, restaurants have less incentive to offer lower prices on smaller food delivery platforms than their own sales channel.

4. Leveraging global insights for guidance

In the absence of specific rules or guidance in Hong Kong or Mainland China, practitioners and companies often look to competition enforcement practices in other jurisdictions—particularly the EU, and sometimes the UK, US—for insights. This approach was explicitly acknowledged by the HKCC in the Foodpanda/Deliveroo case, demonstrating the HKCC’s openness to considering international precedents when developing its analytical framework.¹⁷17

5. Leveraging defences (e.g. rapidly changing market features) to deal with competition authorities

Digital markets are characterised by rapid change and disruptive innovation. The sudden exit of Deliveroo from the Hong Kong market in April 2025 serves as a stark reminder that even well-established companies can be quickly upended by new competition.¹⁸18

This raises crucial questions for future investigations: How can companies leverage market dynamism to their advantage and achieve better outcomes?

EU courts have recognised that in highly innovative markets, traditional indicators like market share provide only a first indicator of market power.¹⁹19 Substantial market power indicating market dominance is not static, and its significance varies across industries.²⁰20

This highlights a key takeaway: While high market shares remain a necessary factor in assessing substantial market power or dominance, they are no longer sufficient on their own to establish market power in fast-evolving markets.²¹21

In the Foodpanda/Deliveroo case, until Keeta entered the Hong Kong market in May 2023, Foodpanda and Deliveroo were the only major players in the online food delivery sector. This led the HKCC to initially view their restrictive practices as potentially foreclosing smaller competitors.

However, Keeta’s expansions during the investigation, eating into the market shares of Foodpanda and Deliveroo, suggested that Deliveroo’s significant market power may have diminished, reducing foreclosure risks. This underscores a vital lesson: companies under investigation should track and document market shifts to demonstrate evolving competitive constraints.

Additionally, the HKCC’s focus on Low Market Share Platforms– those with less than 10% market share – highlights the challenge of fully alleviating concerns. We can infer that the HKCC aims to mitigate foreclosure effects on these smaller platforms and foster competition from them.

In response, companies may consider targeted commitments that address smaller platform concerns without imposing excessive restrictions on themselves or inadvertently benefiting stronger competitors. This approach helps minimise regulatory impact on companies while ensuring a more balanced and efficient investigation process.

6. Wrapping Up

Vertical restrictions extend beyond online food delivery platforms – they can appear in every platform business or supply and distribution chain in today’s marketplace. While these arrangements often fly under the competition authorities’ radar, certain red flags can quickly bring unwanted scrutiny.

When imposed by market giants, when restrictions blanket significant portions of the market or when measures are designed to restrict competition, antitrust alarms will sound. Recognising this delicate terrain and navigating it carefully is crucial for long-term business success.

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Digital platforms in focus: Antitrust insights from Mainland China and Hong Kong scrutiny of food delivery platform – A three-part series

Digital platforms in focus: Antitrust insights from Mainland China and Hong Kong scrutiny of food delivery platform – Part 2