Deliveroo exit could heighten scrutiny of Keeta, Foodpanda

Regulators may have to enforce measures to prevent anti-competitive behaviour.

Regulators are expected to ramp up oversight of Hong Kong’s food delivery market after the exit of UK-based Deliveroo reduced competition to two players.

“Authorities could introduce measures to prevent monopolistic practices and ensure that the market remains fair and competitive, ultimately benefiting consumers,” Xiao Lei, assistant professor of Innovation and Information Management at the HKU Business School, told Hong Kong Business.

He also expects increased marketing from Keeta and Foodpanda to win over former Deliveroo users and partners.

Deliveroo is shutting down its Hong Kong operations on 7 April and selling some assets to Foodpanda, a unit of Berlin-based Delivery Hero SE, after facing intense competition from Keeta, which entered the Hong Kong market in May 2023 and quickly gained significant market share.

Keeta, owned by Chinese shopping platform Meituan, could attract regulatory scrutiny as it grows, said Hannah C. L. Ha, a partner at law firm Johnson Stokes & Master (JSM) Hong Kong.

Keeta’s growing market power might get scrutinised, especially concerning “exclusive arrangements, parity clauses, and tying practices,” similar to those flagged in the Hong Kong Competition Commission’s (HKCC) probe of Foodpanda and Deliveroo in 2022, the lawyer said.

The investigation focused on the platforms’ suspected anti-competitive conduct involving restrictive contract terms for restaurants.

Ha noted that Meituan is under antitrust scrutiny on the mainland, which could expose Keeta to heightened regulatory attention.

As the market becomes more concentrated, Ha said the remaining major players must avoid coordinated conduct such as fixing prices and market sharing.

Foodpanda should honour its December 2023 commitments to the HKCC, Ha said. 

The commitments include amending or removing contract provisions that restricted restaurants from partnering with other platforms, offering lower prices on their channels, or using only selected Foodpanda services.

“While competing to expand, platforms must ensure fair competition practices and avoid conduct that could restrict market competition and violate competition rules,” she said in an emailed response.

Both Keeta and Foodpanda should boost investment in tech and logistics to enhance delivery efficiency, personalisation, and partner variety as their customer base expands, Lei said in an emailed reply to questions.

They should also align restaurant partnerships with customer preferences to sustain market position, such as offering high-end or niche cuisines to attract discerning diners, Ha said.

Both should have enough riders to meet demand, accept orders promptly, deliver on time, and maintain food quality, she added.

Delivery companies planning to enter the market should conduct localised marketing campaigns that resonate with the local culture, including partnering with local influencers,” Lei said. Localization is an area where Deliveroo lacked, he pointed out.

“Deliveroo, as a UK-based company, did minimal localization in the Hong Kong market, whereas Keeta from Meituan leveraged its deep understanding of Chinese consumers,” he said. “Adapting services to meet local preferences and cultural nuances can significantly impact market penetration and customer loyalty.”

To compete effectively, players must first navigate the food delivery market's high entry barriers, such as logistics, Ha said.