Naver Loses Lawsuit to Cancel 26.6 Billion KRW Fine and Corrective Order from Fair Trade Commission

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[Asia Economy Reporter Kim Daehyun] Naver filed an appeal lawsuit against the Fair Trade Commission's sanction for allegedly changing the Naver Shopping search algorithm to favor its own shopping mall platform, 'Smart Store,' and unfairly adjusting the exposure order of search results, but lost the case.

On the afternoon of the 14th, the Seoul High Court Administrative Division 6-1 (Presiding Judge Choi Hansoon) ruled "the FTC's disposition is appropriate" and dismissed the plaintiff's claim in the cancellation lawsuit for the corrective order and fine payment order filed by Naver against the FTC. The appeal lawsuit against the FTC's disposition proceeds through two trials (Seoul High Court and Supreme Court).

On this day, the court stated, "The 'comparison shopping service market,' centered on product searches, and the 'open market,' centered on product sales, should be regarded as separate markets. Smart Store performs the function of an open market, and thus competes with other open markets."

Furthermore, "Naver is a market-dominant business operator in the comparison shopping service market, accounting for over 80% of total transaction volume. The comparison shopping service, Naver Shopping, plays a very important role as an inflow route to the open market, exerting considerable influence in the open market, and can induce open market sellers to transact with Smart Store," adding, "the act of adjusting the search algorithm is an act that may cause competition-restricting effects in the open market and constitutes an abuse of market-dominant position."

In addition, the court said, "Naver's actions constitute a significant discrimination in transaction conditions and an unfair customer inducement act, which qualifies as 'unfair trade practices,'" and added, "contrary to consumers' expectations that the comparison shopping service would provide optimal product search results tailored to their needs, Naver exposed its own Smart Store products at the top of search results and induced customers to transact with itself."

Earlier, the FTC imposed a corrective order and a fine of approximately 26.6 billion KRW on Naver on January 27 last year. This was based on the judgment that from February 2012 to August 2020, Naver adjusted the algorithm determining the exposure order of product search results on Naver Shopping in a way favorable to Smart Store sellers and unfavorable to competing open market sellers.

Naver argued, "The adjustment of the search algorithm was intended to enhance consumer utility," and filed an administrative lawsuit in March last year requesting the cancellation of the FTC's disposition.

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