NHN antitrust investigation widens

The Fair Trade Commission (FTC) yesterday said it has expanded its ongoing antitrust investigation of NHN, operator of Korea’s largest Web portal Naver, to include its online advertising subsidiary.

The agency has been conducting on-site investigations at NHN’s headquarters.

The FTC is set to examine NHN’s actions in the online market environment, including internal transactions with subsidiaries and actions against small independent businesses.

According to industry experts and the FTC, the market monitoring bureau of the FTC, which has been conducting a field survey at NHN’s headquarters in Jeongja-dong, Seongnam, Gyeonggi, since Monday, also is investigating NHN Business Platform in Seohyeon-dong, Seongnam.

The subsidiary is an online advertising arm of NHN that develops products and handles search marketing.

Although it was separated from NHN in 2009, NHN owns 100 percent of NHN Business Platform.

After Overture, a global search advertising agency, withdrew from Korea last year, NHN Business Platform grew in the domestic search advertising market by taking advantage of the dominant position of Naver, its parent.

The government watchdog is said to be examining whether any unfair anti-competition trade practices occurred in the process.

Although the Fair Trade Act allows insider trading with affiliates as a general rule, it may be subject to sanctions if the company uses an unfair advantage for excessive economic gain.

Because NHN is primarily responsible for research and development and user service and NHN Business Platform is dedicated to direct sales, industry insiders had expected the FTC investigation would focus on the subsidiary.

Earlier, the FTC issued a corrective order against NHN after defining it as the dominant operator in the Internet portal market.

It issued a 227 million won ($204,375) fine in 2008 for intentionally hindering operations of a video content provider by abusing its dominance. NHN controls 70 percent of the online search market.

NHN also has been accused of gouging small businesses by charging excessive advertising fees.

Finally, the company was blasted for extending its power into markets outside its core search engine business, such as real estate and wholesale sales to the detriment of small independent real estate agencies and retailers.

By Kim Jung-yoon [kjy@joongang.co.kr]