Netflix Network Usage Fee Free-Riding Controversy... Fair Trade Commission "Closely Reviewing"

"Litigation with SK Broadband falls under the jurisdiction of the KCC,
but the Fair Trade Commission has also been reviewing it since April last year along with the network usage fee lawsuit"

[Asia Economy Reporter Moon Chaeseok] As the controversy over Netflix's 'free riding' on network usage fees in South Korea expands, competition authorities have also stated that they are closely examining the issue. This comes amid a situation where civic groups have issued statements demanding that the government strictly regulate Netflix, the world's largest online video service (OTT) provider thriving due to the spread of the novel coronavirus disease (COVID-19), which refuses to pay network usage fees in Korea.

The Citizens' Coalition for Economic Justice (CCEJ) urged the Korea Fair Trade Commission (KFTC) and the Korea Communications Commission (KCC) on the 23rd of last month to intervene in and resolve the controversy over global content providers' (CPs) 'free riding' on network usage fees. Since Netflix, along with other foreign CPs, virtually monopolizes the domestic internet market, the CCEJ's position is that the government should actively mediate so that Netflix pays fair network usage fees just like domestic CPs.

The KFTC is a government agency that, under Article 3 of the Fair Trade Act, establishes and implements policies to promote competition in markets where monopolistic or oligopolistic market structures have been maintained for a long time in the supply or demand of goods or services. Although the KCC mediates this matter, the CCEJ argues that the KFTC also has an obligation to actively participate given the unfair trade practices and reverse discrimination controversies arising between domestic and foreign companies.

According to the CCEJ, Netflix has denied 'financial party eligibility' and has effectively refused to reach an agreement with SK Broadband (SKB), filing a 'declaration of non-existence of debt' lawsuit at the Seoul Central District Court last month. Netflix has not been responding sincerely to SKB's financial application (network usage fee mediation). Netflix preemptively filed the lawsuit before the KCC issued a final decision on SKB's financial application requested in November last year. Due to Netflix's lawsuit, the KCC's financial mediation was suspended.

At the end of last month, the KCC announced it would convey its position regarding the lawsuit to the Seoul Central District Court, but the KFTC has not shown any particular response. The CCEJ stated, "The government must make a swift decision in response to the administrative and legal gaps caused by the lack of leadership from the KFTC and KCC, which global CPs are exploiting," and strongly urged the government for the KFTC and KCC to respond proactively ahead of the courts.

In response, the KFTC said it is closely examining the network usage fee controversy involving the companies. The telecommunications industry consensus is that since other companies are also being carefully observed, there is a possibility that strict standards will be applied to Netflix as well. Earlier, in April last year, the CCEJ filed a complaint with the KFTC regarding the 'discriminatory treatment of network access fees by the three major telecom companies.'

A KFTC official said, "The main agency handling the lawsuit between Netflix and SKB is the KCC, so the KFTC's position differs from that of the KCC," but added, "We are thoroughly reviewing the issues related to the statement released by the CCEJ last month as well as the matters reported to the KFTC last year."

The KFTC has previously imposed restrictions on the terms and conditions of Silicon Valley IT companies such as Netflix, Facebook, Google, and Amazon multiple times. In January, the KFTC became the first in the world to require Netflix to revise its terms and conditions. Following the KFTC's action, Netflix agreed to obtain member consent whenever it changes service usage fees in Korea. Last month, the KFTC also compelled Twitch TV, a subsidiary of Amazon, to revise its internal regulations that allowed it to terminate contracts or delete content without notifying consumers.

Meanwhile, Netflix is enjoying a boom in the domestic market. According to a survey released on the 29th of last month by market research firm IGAWorks, Netflix's monthly active users (MAU) in March reached 3,934,665, a sharp increase of 128.5% compared to the same period last year. This was a reflected benefit from the increase in 'homebodies' due to the COVID-19 pandemic.

This content was produced with the assistance of AI translation services.