Fixing regulations

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Fixing regulations

The author is a senior reporter of the JoongAng Ilbo.

I didn’t know things would be like this ten years ago.

The Biden administration is about to censure Silicon Valley tech companies. President Joe Biden nominated Columbia Law School Professor and “Amazon sniper” Lina Khan for Commissioner of the Federal Trade Commission.

She has become famous for precisely addressing the loopholes of the current antitrust law based on the 20th century world order. The Biden administration accepted Khan’s argument that defining monopolies based on consumer benefits cannot regulate Amazon, which dominated the market with the lowest price and fast delivery.

Alibaba was once the pride of Chinese capitalism, but it is in crisis lately. The company has been fined $2.8 billion by the Chinese government, the heaviest fine in China’s history. The financial authorities also demanded founder and chairman Jack Ma sell his shares of financial subsidiaries, according to a Reuters report.

Is this all because of Ma’s blunt remarks? Not necessarily. Compared to other Chinese businessmen who collapsed because of fraud or embezzlement charges, the reasoning for imposing the fine on Alibaba is based on market principles. Alibaba is charged with forcing vendors on its shopping mall not to sell on other platforms.

Countries around the world are reviewing their regulatory framework because the market has changed. They are trying to create an environment for new stars to be born and reduce the shadow of new industries. Ten years ago, the Obama administration nurtured Silicon Valley, but Biden, who was the vice president back then, is shaking big tech. Even China is creating different standards based on the nature of internet and platform industries.

The Korea Fair Trade Commission wants to design a new order by creating laws for fair online platforms. But they lack understanding of the market, as they are drafting a law regulating even unprofitable start-ups for abusing platform influence.

Controversies are repeated as the regulator sticks with existing regulations. The issue of designating the heads of the companies with more than 5 trillion won ($4.48 billion) in assets is also problematic. That’s a regulation made 30 years ago to prevent conglomerates, which grew and monopolized certain markets with the government’s financial assistance, from trying to turn the earnings of their shareholders into family profit. Four years ago, Naver was selected for the designation of conglomerate head, and this time, Coupang was chosen.

Naver and Coupang are different from existing chaebol. They grew without the assistance of the government, and there are already shareholders watching them. Even the founder should be ready to step down if the board of directors votes to oust them, as in Uber and WeWork. Would regulating these companies as chaebol help encourage competition? With so many old, new and changing regulations, start-ups are forced to seek out executives with some sort of legal background. This is the reality in Korea.
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