Seeking a balanced Internet ecosystem

The Fair Trade Commission, South Korea’s antitrust regulator, said last month it would enter a 40-day review to study and negotiate a settlement with NHN - operator of Korea’s top portal site and search engine Naver - to ease abuse of its near-monopolistic status instead of penalizing the local Internet giant for unfair business practices. Under the agreement, Naver will state the origin of all of its paid services and strictly differentiate between advertising and content. Korea is among the few countries in the world where cyberspace is not dominated by the global search engine Google thanks to the strong presence of Naver, which accounts for nearly 75 percent in the search engine market in Korea.

However, it has recently been under fire for its predatory and greedy business practices of gobbling up ideas, services and the content of smaller companies, while reaping huge profits from shopping and real estate services at the expense of eating up the share of small market competitors. Although belatedly, we welcome that the authorities and the company came to realize the urgency to restore balance in the ecosystem of our Internet community.

The settlement, however, cannot be the fundamental solution to fix the distortion and imbalance in the Internet ecosystem. Naver remains the dominant player in the market. Companies that are directly hurt and disadvantaged by Naver’s predominance are small enterprises that do businesses providing information and services on the Internet, not overall small and midsize merchants.

NHN offered to donate 50 billion won ($47 million) to a start-up fund, 30 billion won for a public-interest publicity campaign, and 20 billion won to fund nonprofit organizations as part of the settlement. But it is questionable how much of the money will reach Internet companies that had suffered from Naver’s overstretch to compensate for their losses and strengthen their competitiveness. The arrangement does not send loud and clear messages that Naver will no longer use its dominant status to infringe on other fields and instead seek symbiotic development by sharing the revenues with other Internet service providers.

NHN and Naver must demonstrate that the compromise has not been offered in order to escape public criticism and sustain its dominance in the market. It must show and prove to its smaller rivals from which it had been generating sizable advertising fees in return for their places on its site that it is willing to enrich and develop the cyberspace business community together and not alone.

By Yoo In-ho, Secretary general of the Korea Internet Professionals, Association