[Platform Power Abuse] The Shadow of Giant Platforms... Small Business Owners Caught Between Holding On and Letting Go

Planning - Abuse of Power by Platforms in the COVID Era (Part 1)
Commission Controversies in Accommodation, Delivery, Taxi, and More

[Asia Economy Reporters Seulgina Jo and Bokyung Kim] The controversy over commission fees charged by dominant giant platforms is not unique to Yanolja, the number one accommodation platform in South Korea. As platforms rapidly grew during the COVID-19 pandemic, the darker side of these "platform giants" has become more pronounced.

In particular, with the absolute increase in platform influence due to the spread of contactless (untact) services, small business owners have been forced into a situation where they must accept unfavorable conditions. While innovation and growth of platforms leading the Fourth Industrial Revolution era are important, there is growing criticism that these platforms should not exploit small business owners. Ultimately, this issue is pointed out to inevitably shift the burden onto consumers through price increases.

◇ "Only Platforms Get Fat" Commission Conflicts Erupt Everywhere

According to industry sources on the 12th, alongside protests from small business owners and the Fair Trade Commission’s investigation into the accommodation platform Yanolja, commission conflicts are intensifying across various platforms.

The spark for discussions around appropriate commission fees traces back to the delivery platform Baedal Minjok, which holds about 60% of the domestic market share. In April last year, Baedal Minjok announced a new fee system charging a fixed commission per order but withdrew it following backlash from small business owners and criticism from political circles. After facing public backlash, Baedal Minjok introduced the single-delivery service "Baemin1" in early May. While delivery speed increases, the brokerage commission (12%) and delivery fee (6,000 KRW) nearly double from previous rates. Although discounts will be offered for 90 days, once the promotion ends, the burden on both business owners and consumers will inevitably increase.

The global platform giant Google’s "30% app tax" controversy is also cited as a representative case exposing the harsh reality of commission abuse by platforms. Google, which holds nearly 70% of the domestic market share, officially announced last year that it would enforce in-app payments for all apps and content on its app market, Google Play, and take a 30% commission in the process, sparking criticism. This measure directly impacts developers as well as consumers using video and webtoon services. There are also legal controversies over forcing a specific payment method.

The commission conflict between Kakao Mobility and the taxi industry is ongoing. Kakao Mobility, which controls 80% of the taxi call service market, recently launched a paid membership where taxi drivers pay 99,000 KRW per month to receive dispatch benefits. Additionally, it notified major domestic franchise taxi operators that they must pay a certain commission to receive KakaoT calls. In response, four taxi organizations recently issued a statement opposing this, saying, "Kakao, which promised not to monetize taxi call services, is trying to enforce monetization through the trick of memberships." An industry insider pointed out, "The franchise taxi commission controversy has long been an issue. Since commissions are taken from total sales rather than just dispatch revenue, drivers lose even the income earned from picking up passengers on the street."

Other online platforms like Coupang’s Winner system have also been criticized for inducing cutthroat competition among small business owners and industries while the platform companies reap all the benefits. According to a survey by the Korea Federation of SMEs, the average commission fee on Musinsa, the number one online fashion platform, was found to be as high as 27.6%.

◇ Concerns Over Winner-Takes-All... Need to Revive Market Competition

This is evaluated as closely related to the confidence of platform giants backed by near-monopoly market shares.

Earlier, Kim Jae-shin, Vice Chairman of the Fair Trade Commission, expressed concerns in an official setting that "the market monopoly of large online platforms could block subsequent innovation and threaten the market economy." Just as winner-takes-all phenomena appeared among giant companies during the industrialization era, similar side effects are increasingly being confirmed in the platform economy.

What is noteworthy is that even a single policy change by a market-dominant operator can shake the entire industrial ecosystem. Very few small business owners, app developers, or taxi drivers can withstand double-digit commission fees. There are also signs of platform abuse, such as excessive advertising costs. Ultimately, to prevent the collapse of the industrial ecosystem, it is necessary to restore a competitive structure where platform companies compete on commission fees within the market.

Although alternative platforms have emerged, such as Delivery Express led by local governments with relatively lower commissions, regional taxi association call apps, and accommodation apps by the Korea Accommodation Industry Association, their influence is weak and proper competition is difficult in an already tilted playing field. In Yanolja’s case, it has even entered direct competition with small business owners by promoting its own brand hotels like Hotel Yam. The total number of nationwide brand hotels has exceeded 200. Among local accommodation business owners, complaints arise that they are "forced to advertise reluctantly and are struggling."

Han Junho, a member of the Democratic Party of Korea, pointed out, "The problem lies in platform companies growing in scale, dominating the market, and then imposing excessive commissions. It should not become a way to exploit small business owners." He added, "If platform companies can reduce commissions through market competition, consumers will also be able to receive better services."

According to a recent survey conducted by the Ministry of SMEs and Startups targeting 978 companies operating on online platforms, the highest response (35.4%) indicated that online platform brokerage commissions accounted for "10-15%" of sales. Responses indicating "20% or more" accounted for 17%, and "15-20%" accounted for 12.1%. More than four out of ten respondents answered that the reason for continuously using online platforms was "it is difficult to sustain business without using them (44.3%)."

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