FTC drafts bill to crack down on Google and Kakao

Industry

Published: 19 Dec. 2023, 17:31 Updated: 19 Dec. 2023, 17:55

FTC drafts bill to crack down on Google and Kakao

Fair Trade Commission (FTC) Chairman Han Ki-jeong speaks about a new bill proposed by the antitrust regulator that would impose restrictions on platform operators at a press briefing at the government complex in central Seoul on Tuesday. [NEWS1]

The Fair Trade Commission (FTC) is proposing a bill to prohibit platform operators from curbing competition by limiting users' access to competing services, a decision that has provoked opposition from Korea's business associations and tech industry.

The antitrust regulator said that it is drafting the bill after discussions with related government agencies, without specifying the goals of the regulation or the penalties for noncompliance. Platforms run by companies like Google, Naver and Kakao could be subject to the proposed bill, according to media reports.

The FTC hopes that it would lead to prevention of unfair business practices and ease consumer burden. Moreover, restricting dominant platforms can open the door for small- and medium-sized enterprises (SMEs) and startups to grow, FTC said.

“Such platforms are quickly mounting their influence in the market through unfair business practices such as prohibiting startups or other platforms from entering the market,” the FTC said in a statement.

“The platforms’ monopolistic practices are putting burdens on the consumers due to increased commission charges and subscription fees.”

The regulator would label a few large-scale platform operators with considerable influence in the domestic market as “dominant platform operators” and restrict them from engaging in “unfair” practices such as favoring their affiliates and preventing multi-homing, or the practice of connecting simultaneously to multiple platforms.

It will distinguish “dominant platform players” based on their domestic revenue and the number of users who utilize their search engines, messaging services, cloud services, online advertisements and marketplaces, similarly to the way the European Union (EU) enforces its Digital Markets Act.

The EU designates platforms which generate more than 7.5 billion euros ($8.2 billion) annually as “gatekeepers” in the digital sector and impose regulations on their core services.

The bill proposal was backed by President Yoon Suk Yeol, who requested last month that the FTC “come up with measures that could reduce monopolistic malpractices of large-scale platforms.”

In presenting the proposal, the FTC mentioned Google's policies banning game publishers from releasing their titles in markets outside of Google's Play Store such as One Store, a competing Android app store created by Naver and Korea's three mobile carriers. It also cited Kakao's ride-hailing affiliate Kakao Mobility's manipulation of its ride-dispatch algorithm to favor its own drivers above others.

Korea's five major business associations, including the Korea Internet Corporations Association, or K-Internet, voiced strong opposition to the bill, claiming that the tech industry is already doing its best to self-regulate its platforms amid thorough discussion with consumers and SMEs.

Restricting online platforms in such a manner could harm consumers, the association warned.

“Amid economic slowdown, consumers are actively utilizing digital platforms for rational spending, and a preregulatory approach from the government without backing of proper evidence would only lead to consumer inflation,” the association said in a statement. “Another bill to restrict online platforms on top of the existing Fair Trade Act will retract the domestic market due to excessive sanctions and will snowball into a huge burden for the companies and the consumers as well.”

American Chamber of Commerce in Korea (Amcham) also voiced opposition to the Ministry of Trade, Industry and Energy Tuesday.

“The bill goes against the current administration’s prior commitment to implement ex-ante regulations when it is not a situation where online platform operators can abuse their influence in the market,” Amcham said. “Rash decisions related to new regulations would only lead to an unnecessary rise in consumer inflation and act as a setback to consumer welfare.”

An anonymous industry insider told the Korea JoongAng Daily that the new bill holds several risks that could hurt the domestic IT industry.

“What’s important is whether the government could come up with specific regulations that are equally applicable to both local and foreign platform operators,” said the insider. “Perhaps the new bill would only provide new opportunities for foreign platform operators, such as Chinese commerce companies active in Korea, such as AliExpress, which are growing rapidly year over year.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]