Competition watchdog investigates online food delivery sector, virtual kitchens

THE Competition and Consumer Commission of Singapore (CCCS) has commenced investigations into the online food delivery and virtual kitchens sectors, with an eye on the use of exclusive agreements and refusal of service by players to block competition.

The investigation is focused on two types of conduct, said the competition watchdog in response to queries from The Business Times (BT).

One involves exclusive agreements which prevent food and beverage (F&B) tenants of virtual kitchens from using the online food delivery services of competitors. The other involves the refusal to supply online food delivery service to F&B tenants of virtual kitchens either run or owned by competitors.

"Third-party feedback indicated that it is important for F&B businesses to have access to multiple online food delivery services in order to reach a wider consumer base," said CCCS.

The investigations follow a spat between independent virtual kitchen operator Smart City Kitchens (SCK) and delivery providers Deliveroo and GrabFood. In July, SCK filed a formal complaint with CCCS, alleging that Deliveroo and GrabFood disabled existing food delivery services and halted new services for restaurants using SCK's shared kitchen in Tampines.

In response, Deliveroo said it has not informed any restaurant partner that they cannot work with SCK as the firm is currently still in discussions with SCK, while GrabFood said SCK's kitchen location was not optimal, hence the vendors were rejected from GrabFood's platform.

The merchants within SCK's kitchen continue to have access to foodpanda's delivery services.

Food delivery's meteoric rise has led to the growth of virtual kitchens, also called cloud kitchens.

In Singapore, food delivery operators such as Deliveroo and foodpanda have built a total of five cloud kitchens around the island to capture demand in underserved areas. F&B outlets housed within these kitchens can only serve the users of the respective delivery providers, BT understands.

GrabFood will soon open its own kitchen in Singapore. On Tuesday, it expanded its cloud kitchen network outside of Indonesia with launches in Thailand and Vietnam, bringing the number of kitchens it operates to 20. It plans to launch more than 50 GrabKitchens in five markets, including the Philippines and Singapore, by year-end.

In defining virtual kitchens, CCCS said these facilities are commercial kitchen spaces rented out to F&B businesses for food preparation predominantly for consumers ordering food through online food delivery services.

"F&B tenants of a virtual kitchen are usually housed within a common building with shared facilities, such as refrigeration and storage spaces," said CCCS.

"Virtual kitchens allow F&B businesses to start and expand their food delivery operations without the costs associated with running a brick-and-mortar restaurant. They can serve as a testbed/incubator for entrepreneurs in F&B businesses and also enable consumers to buy food concurrently from different F&B tenants housed within a virtual kitchen, that is, 'mix-and-match' their food orders."