[Issue Analysis] Dinosaur Big Tech Regulation Stalled... The Core of Platform Regulation is 'Increasing Speed'

Fair Trade Commission to Promote 'Platform Fair Competition Promotion Act'
Industry Claims It as a "Preemptive Regulation Stigma"
Google Regulation Took 7 Years... App Market Share Increased from 80% to 90%

The core of the "Platform Fair Competition Promotion Act" announced by the Korea Fair Trade Commission (KFTC) on the 19th is to pre-designate big tech platform companies that meet certain criteria and swiftly regulate their unfair practices. Jo Hong-seon, Vice Chairman of the KFTC, cited "speed" as one of the essential needs that this regulation aims to address. Although it is possible to regulate the anti-market behaviors of "Nakao" (Naver and Kakao) under the Fair Trade Act, it takes an excessively long time, which reduces the effectiveness of the regulation.

Naver Headquarters. Photo by Jinhyung Kang aymsdream@

The Fair Trade Act can also regulate anti-competitive behaviors of market-dominant businesses. However, it takes a long time to apply the regulation. For example, it took seven years for the KFTC to impose a fine on Google for blocking the launch of domestic game companies on One Store by setting conditions such as favorable game exposure on Google Play, Google's app market store, in April. The KFTC received the results seven years after starting the investigation. During this seven-year period, Google solidified its influence in the domestic app market.

The main reason for the lengthy time to regulation is that the Fair Trade Act requires the KFTC to provide detailed proof, as it is a "post-regulation" system. Post-regulation means that the authorities bear the burden of proof for the violation stipulated by law and seek a court ruling. It presupposes the KFTC's detailed responsibility to prove that the specific acts of a monopoly business are anti-competitive and that the side effects outweigh consumer welfare. In particular, fierce logical battles occur over defining the "relevant market" in which the dominant business operates during the process of proving market dominance.

Ahead of the 2 PM meeting on the 11th, where Kakao founder and Management Innovation Committee Chairman as well as Future Initiative Center Director Kim Beom-su announced he would hold a discussion with employees, staff members are entering and exiting the Kakao headquarters in Pangyo, Seongnam City. Photo by Heo Young-han younghan@

The problem is that platform companies encroach on the market faster than traditional markets. Due to the unique "lock-in effect" of the online platform market (an effect or phenomenon where once a specific good or service is used, it becomes difficult to consume other goods or services, leading to continued use of the existing one), once a large number of users are secured early on, the monopoly effect in the market becomes entrenched. Therefore, if it takes a long time to apply regulations, even imposing high fines becomes ineffective, resulting in so-called "belated sanctions." According to the KFTC, Google's blocking of game releases significantly weakened One Store's competitiveness, and Google's monopoly power expanded from about 80% to 90% market share. During the seven-year regulation period, Google's influence further expanded, reducing the effectiveness of the regulation.

Vice Chairman Jo emphasized, "The 'Platform Fair Competition Promotion Act' can reduce the time by about half." He explained that the law aims to intervene in the market with a sense of speed. Since the Platform Fair Competition Promotion Act is a kind of pre-regulation that pre-sets companies meeting the criteria, it can reduce the time spent on determining whether the company is a market-dominant business and whether the market definition for that judgment was accurate. Going forward, the burden of proof will shift significantly from the KFTC to the companies. Because the law pre-defines which companies are dominant and the prohibited acts under the regulation, companies must prove that the regulatory application by the authorities is incorrect to avoid sanctions.

In response, platform companies are concerned that such pre-regulation could excessively restrict their business activities. In particular, there is considerable opposition to the prohibition of "self-preferencing," a management practice unique to platform companies. Self-preferencing refers to operating a platform where consumers and tenant businesses can trade, while designing the market to favor the sale of the platform operator's own products. Actions such as placing one's products on the main screen or prioritizing the application of one's payment system can all be considered self-preferencing. Setting Naver Pay as the default payment method on Naver Shopping could also be considered a self-preferencing act. At the KFTC plenary meeting, a fierce debate unfolded between companies' arguments that this policy is a "strategic management method" and the KFTC's argument that it hinders market competition. If this law passes, the delay caused by such logical battles will be significantly reduced. This is because companies will have to prove that the policy does not significantly restrict market competition or, even if it does, that the benefits to consumer welfare outweigh the restrictions.

[Image source=Yonhap News]

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