Fair Trade Commission Sanctions 'Naver Budongsan'... What About Shopping and Video Services?

Fair Trade Commission: "Naver, a dominant platform business operator abusing its market power... Practically excluding Kakao from the market"
Naver: "Measures to prevent free-riding and protect intellectual property rights... Considering legal response"

Song Sang-min, Director of the Market Surveillance Bureau at the Korea Fair Trade Commission, is giving a preliminary briefing on April 4th at the Government Complex Sejong in Sejong City regarding the abuse of market dominant position by Naver Real Estate.
[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC), which is targeting Naver's abuse of market dominance in the real estate, shopping, and video sectors, has decided to impose sanctions on the real estate sector first. Accordingly, there are expectations that the shopping and video sectors, which are awaiting final review, may also find it difficult to avoid the FTC's scrutiny. Some analysts interpret the FTC's move as setting a kind of "example" by taking action against Naver, a representative domestic platform giant, ahead of enacting the 'Online Platform Fairness Act' to regulate unfair trade practices in the platform sector.

On the 6th, the FTC announced that it decided to issue a corrective order and impose a fine of 1.032 billion KRW on Naver for its act of prohibiting real estate information providers (CPs) from supplying real estate listing information provided to Naver to third parties when signing contracts.

The FTC judged that Naver blocked Kakao's entry into the real estate market. Kakao attempted twice to partner with real estate information providers to expand its real estate information service, but all partnership attempts failed due to Naver's interference.

The FTC viewed that Kakao was effectively pushed out of the market as its attempts to collect listing information through partnerships with real estate information providers were thwarted. Kakao's volume of listings and sales sharply declined, and since April 2018, Kakao has been operating its real estate service through a consignment agreement with Zigbang. Song Sang-min, Director of the Market Surveillance Bureau at the FTC, pointed out, "Naver's market dominance has been further strengthened due to the contraction of competing businesses," adding, "Ultimately, this resulted in a reduction of final consumers' choices."

Naver maintains that this is a "legitimate exercise of intellectual property rights." A Naver official stated, "The listing information that Naver prohibited from being provided to third parties is 'Verified Listings' on Naver Real Estate, a service introduced by Naver in 2009 as the first in the industry to eradicate false listings and provide accurate listing information to users," and added, "Kakao, a competitor, attempted to use Naver's Verified Listings without any cost or effort, and Naver included the clause prohibiting third-party provision to prevent 'free-riding' and protect its 'intellectual property rights.'"

Naver is currently considering legal action against the FTC's measures. Given that the FTC is conducting reviews on the shopping and video sectors following real estate, Naver believes a more proactive response is necessary.

However, the FTC drew a clear line, stating that the sanctions on the real estate sector will not affect the review results for the shopping and video sectors. Director Song emphasized, "Each case should be considered independent in terms of facts and market definition," interpreting this as a principle of NCND (neither confirming nor denying) regarding ongoing matters. He added, "The shopping sector held a plenary meeting on the 19th of last month and is currently in the process of reaching a consensus," and "The video sector is expected to have a plenary meeting in September."

This FTC sanction against Naver's real estate sector is the first case handled by the special task force in the Information and Communication Technology (ICT) field. It penalizes the 'multi-homing block,' where a monopolistic platform operator abuses its dominance to prevent trading partners from dealing with competing businesses. Industry insiders interpret the FTC's sanction as a signal that it will actively crack down on unfair practices by online platforms such as portals. Additionally, it is seen as preparatory work to establish clear standards for unfair practices by platform operators ahead of the enactment of the Online Platform Fairness Act. An industry official said, "Under the existing Fair Trade Act, punishment is possible only if a dominant-subordinate relationship between the platform and tenant businesses is recognized, but once the Platform Fairness Act is implemented, sanctions against platform companies like Naver will be possible without considering such relationships," adding, "This sanction against Naver also serves to highlight unfair practices that can occur in the platform market and emphasize the necessity of enacting the Platform Fairness Act."

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