[The Editors' Verdict] Regulatory Competition over Online Platforms

One of the changes in daily life caused by the novel coronavirus infection (COVID-19) is the rapid increase in online shopping. According to Statistics Korea, the transaction amount of online shopping malls, which was 25.2 trillion won in 2010, increased to 135.3 trillion won in 2019 and surged to 74.3 trillion won by June of this year. Online video services such as YouTube and Netflix have already replaced traditional media markets, and internet companies like Naver and Kakao have emerged as leaders not only in search portals but also in the fields of news, shopping, media, and finance.

Businesses that provide services mediating suppliers and end users of products and services online are called online platforms. Online platforms have attracted the attention of regulatory authorities as they raise various policy issues due to the transition to a data-based digital economy, the surge in contactless transactions caused by COVID-19, and the acceleration of market concentration due to network effects.

Conflicts with existing businesses due to online platforms’ expansion into various markets, data monopolization, unfair trade issues with platform users, and consumer protection issues have brought online platform regulation to the forefront. The European Union (EU) was the first to take action. The EU implemented the General Data Protection Regulation (GDPR) in May 2018, restricting the use of data by global online platform companies such as GAFA (Google, Amazon, Facebook, Apple). Since July 2020, the EU has enforced the 'EU Council Regulation on Fairness and Transparency in Online Platform Markets.' Japan also enacted the 'Act on Transparency and Fairness Improvement of Specific Digital Platforms' in June this year.

Not to be outdone by these overseas cases, Korea’s Fair Trade Commission announced a legislative proposal for the 'Act on Fairness in Online Platform Intermediated Transactions' at the end of last month. The proposal includes obligations such as contract drafting and delivery, prior notification in case of contract changes, and specifies prohibitions on abuse of bargaining position under the Fair Trade Act.

In addition, five members of the National Assembly have each proposed amendments to the Telecommunications Business Act to regulate app market platforms, including prohibiting forced payment methods and unfair fee collection.

The Ministry of Science and ICT, the main agency for ICT policy, launched the 'Online Platform Policy Forum' to establish mid- to long-term platform policies, and the Korea Communications Commission is addressing platform issues through the '3rd Internet Win-Win Council.' Regarding internet video services (OTT), the Ministry of Science and ICT, the Korea Communications Commission, and the Ministry of Culture, Sports and Tourism are competing?not cooperating?for policy leadership.

As such, regulatory competition among the National Assembly and executive agencies is intense. Excessive regulatory competition among state agencies risks producing unnecessary regulations that could hinder corporate innovation. This has been a reason for cautiousness in platform regulation so far. Another reason is that unlike the EU, which has nothing to lose, strengthening the competitiveness of domestic online platforms is important for Korea.

Meanwhile, it is worth considering whether it is appropriate for the Fair Trade Commission, which has traditionally focused on ex-post regulation due to the nature of competition law, to seek ex-ante regulatory authority, which is typically the domain of specialized regulatory agencies. Even if regulation is necessary, there is a sense that the process is somewhat rushed. Compared to the EU’s rulemaking, which took more than three years, Korea announced the legislative proposal just three months after the first press release, and various app market regulation bills were immediately proposed once the issue arose.

Finally, it is necessary to review whether new bills are being proposed merely to show results, even though existing laws could already regulate these matters through interpretation.

When regulatory competition or overlap occurs among agencies, the need for coordination cannot be overstated. However, even before that, each agency should consider principles of task allocation among agencies before introducing regulations and conduct thorough and careful discussions on the necessity, advantages, and disadvantages of new regulations.

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management / Director of the Technology Law Policy Center

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