Abuse of power by online giants targeted by the FTC
The Fair Trade Commission (FTC) said Thursday it is developing regulations designed to prevent gapjil, or abuse of power, by online companies such as delivery apps and online shopping malls.
The coronavirus pandemic provided a boost to non-contact services, and their influence in the market is becoming more powerful by the day. Against this backdrop, the antitrust regulator said it saw the need for new regulations to crack down on unfair practices that did not exist in the past.
The FTC said Thursday it is developing legislation that enforces fair market practices between platform providers, like Baedal Minjok and Naver, and companies that sell their products or services on these sites.
“We are seeing growing risks of unfair practices in the market, such as platform companies shifting promotion expenses to individual sellers, and causing damage to customers by not taking responsibility for defective products,” explained the FTC.
It also said it would establish inspection guidelines to prevent large online shopping malls with more than 100 billion won ($83 million) in operating profit from shifting costs — promotion expense or discounts — to suppliers. The existing laws were written with large discount chains in mind and were difficult to apply to online shopping malls, according to the FTC.
Mobile delivery applications and online video streaming services will bear heavier responsibility. The antitrust regulator will require both the platform provider and the seller on the platform assume liability for customer damages, as well as come up with formal procedures to settle disputes. It plans to check the contractual terms and conditions of such platforms and mandate them to fix unfair terms. The FTC previously requested the food delivery app Baedal Minjok to correct four unfair terms in its contracts with restaurants on June 9.
It will also tighten surveillance of market dominance to encourage new companies to enter the market. The FTC plans to establish official inspection guidelines to prevent companies from abusing their authority.
The FTC said it will take a careful look into factors that may limit competition with regards to Delivery Hero's acquisition of Baedal Minjok last year. This includes concerns over a raise in fees and the monopolization of information.
“Platform business is a new area, so it is important to set up fair market practices from the start. We plan to push forward a legislation by the first half of next year, after listening to opinions from both sides — platform operators and sellers using the platform,” said the FTC.
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