FTC visits Naver amid probe on NPay

The Fair Trade Commission visited the headquarters of Naver, the country’s top search engine operator, on Tuesday amid allegations that the tech company used its market dominance to promote its own payment system on its shopping site, a source familiar with the matter said.

Although the Fair Trade Commission did not officially confirm the visit, the news represents a coup because such field investigations are conducted after the commission has verified suspicions of malpractice and usually precede penalties.

Last September, the Fair Trade Commission began investigating Naver after a consumer rights group, Green Consumer Network, accused the tech company of limiting consumer choice by promoting its own payment system over others.

Naver’s shopping site, according to the group, prioritizes stores that let customers pay with NPay, Naver’s own system. These stores show up higher on results when customers search for a product. If they want to use payment systems other than NPay, such as Kakao Pay or Samsung Pay, they have to click through more buttons.

Green Consumer Network argues Naver’s setup practically forces customers to use NPay and violates the country’s antitrust laws.

In response, Naver said such practices have been adopted by global tech companies like Amazon and Google, which refer customers to their own payment systems. It requested the Fair Trade Commission and Korea Communications Commission set up a guideline if they consider the practice a violation.

During a National Assembly hearing in October, Kim Sang-jo, chairman of the Fair Trade Commission acknowledged there were problems with Naver’s dominance in the search engine market and said his agency was closely monitoring the company.

As of June last year, Naver was estimated to have a 74.7 percent share of desktop searches and 72.9 percent of mobile searches, according to Green Consumer Network.

The popularity of online payment has been growing in Korea since Kakao introduced the first system, Kakao Pay, in 2014. In the third quarter of last year, about 76.2 billion won ($70.1 million) was transacted daily through these payment systems, according to the Bank of Korea, up 30 percent from the previous quarter.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]