How will South Korea’s Online Platform Self-Regulation Work?

By Somang Yang | August 2, 2022

Photo by Joongil Lee on unsplash

Since the Yoon Seok-yeol administration took office with a deregulatory zeal, the fate of various legislative efforts to regulate the power of online platforms look doomed.

The “Online Platform Fairness Act” was promoted by the ruling Democratic Party of Korea during the Moon Jae-in administration, after tech platforms began expanding their businesses to e-commerce, delivery, and advertising, encroaching on the domain of small businesses. The purpose of the bill was to ensure that tech giants do not use their market power and data dominance to engage in unfair business practices that hurt small merchants and consumers.

However, duplicative legislative efforts, most notably between the Fair Trade Commission’s ‘Act on the Fairness of Online Platform Brokerage Transactions’ and the Korea Communications Commission’s ‘Act on the Protection of Online Platform Users’ failed to pass the National Assembly due to concerns about reverse discrimination of local companies vis-a-visa global tech companies. With the arrival of a pro-business president, the debate on the bills lost momentum.

The Yoon administration has repeatedly stated their preference for voluntary self-regulation in the tech sector, to the delight of tech companies such as Coupang, Naver and Kakao. However, civic groups are skeptical about whether tech giants would voluntarily curb their abuse of market power.

Ministry of Science and ICT tapped as main regulatory body over Fair Trade Commission

According to media sources, the Ministry of Science, Technology and Information and Communication (MSIT) will become the main regulatory authority over tech platforms.

The fact that the MSIT, which promotes the tech sector, will be in charge instead of regulatory agencies such as the Fair Trade Commission or the Korea Communications Commission is a reflection of the Yoon government’s tendency to view these issues through a growth and innovation lens rather than a regulatory lens.

Telecommunications Business Act to be amended to the Digital Service Act

According to the relevant ministries, it is expected that the ‘online platform self-regulation’ plan will be included in the Telecommunications Business Act under the jurisdiction of the Ministry of Science and ICT.

A high-ranking government official explained, “The name of the Telecommunications Business Act has been changed to the Digital Service Act, and the plan for self-regulation of the platforms is almost completed.”

Creating an industry self-regulating body

The main goal of the platform self-regulation plan is to create a self-regulatory body jointly invested by private companies, and to prepare industry guidelines to strengthen transparency of transactions, enhance user convenience, and improve data accessibility.

The body would be modeled on the lines of the self-regulating body for reviewing medical advertisements set up in 2018, which is composed of three groups of medical professionals: the Korean Medical Association, the Korean Dental Association, and the Korean Oriental Medical Association.

Compliance program to incentivize self-review

In addition, the FTC plans to expand a system similar to the CP (Compliance Program) to the platform business field to promote self-reviews. If a company’s CP is grade A or higher, they will be exempted from the Fair Trade Commission’s investigation for up to two years. The purpose is to give incentives to platform operators who do not abuse the stores and comply with self-regulation.

Thorny issues remain unaddressed, skeptics unconvinced

Civic groups have remained unconvinced that self-regulation would curb monopolistic practices. Lee Ji-woo of the influential civic group People’s Solidarity for Participatory Democracy said “There have already been several unfair trades, and if there is no law, of course it will be difficult to comply. The Online Platform Law provides a minimum level of protection to create a level playing field, particularly in online marketplaces.”