South Korea agonizes over the power of online platforms

By Somang Yang | March 18, 2021, 1:30PM

Photo by Shawn Ang on unsplash

As South Korea heads into an election year, there is no disagreement among the competing parties that the monopoly power of online platforms needs to be curbed. The only real source of debate is who will do the regulating, and how far the measures will go in the world’s 3rd biggest e-commerce market.

Types of Online Platforms

 TypeExample
Online

Platforms

Supply and demand matchersSocial media, P2P 2nd hand markets
Market information providersPrice comparison websites, social media malls
Transaction intermediariesOpen market, accommodation booking sites, delivery sites & apps, App Markets

 Source: Fair Trade Commission

There are at least 3 competing regulatory efforts being considered by the National Assembly:

  • Bill on Online Platform User Protection proposed by the Korea Communications Commission (KCC) aims to protect users of platforms by banning the manipulation of search algorithms, depriving users of choice in which app marketplaces they can use and bans unilateral setting of user fees;
  • Online Platform Fairness Act proposed by the Fair Trade Commission (FTC) regulates relations between platforms and merchants, with a fine of up to 1 billion won (US$1 million) as a penalty for unfair practices such as against merchants, mandates the creation of transparent contracts and introduces liability for online platforms for damages to merchants;
  • The amendment to the Act on Promotion of Win-Win Cooperation Between Big Corporations and SMEs aims to boost the negotiating power of SMEs vis-a-vis Big Tech by proscribing the terms of transaction in fees and advertisements and giving the Minister for SMEs the power to take corrective actions. While this law is similar to the Online Platform Fairness Act, it is notable for defining online platforms for the first time.

Additionally, specific to e-commerce,

  • The proposed revision to the Electronic Commerce Consumer Protection Act championed by the FTC mandates that search results in online shopping malls and delivery apps clearly differentiate and label “pure search results” and “sponsored search results”. Online platforms that charge a commission on 3rd party listings offered on their platforms will also have joint liability for damages filed by consumers.

While the battle for control of regulatory powers (and the resulting prestige and budget) between the FTC and KCC is expected to be contentious, no one doubts that it is a matter of when – not if – the rules governing online platforms will be tightened.

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