FTC aims to ban four anticompetitive practices at Naver, Kakao in sweeping antitrust proposal

Home > Business > Economy

FTC aims to ban four anticompetitive practices at Naver, Kakao in sweeping antitrust proposal

Published: 09 Sep. 2024, 19:14 Updated: 09 Sep. 2024, 19:17

SHIN HA-NEE
shin.hanee@joongang.co.kr

Fair Trade Commission Chairman Han Ki-jeong speaks during a press conference at the Sejong government complex Monday. [NEWS1]

Korea’s Fair Trade Commission (FTC) is set to tighten antitrust regulations on major online platforms with harsher penalties and a stronger burden of proof.

The latest plan, which the antitrust regulator announced Monday, follows the previously proposed Platform Competition Promotion Act, which was suspended due to strong opposition from tech companies.

The FTC is pushing for a revision of the Monopoly Regulation and Fair Trade Act under the updated plan, rather than a new policy.

The revision would aim to ban four anticompetitive practices — preferential treatment of a platform’s own companies, tie-in sales, restrictions on multihoming and demands for favorable management — across the six online service sectors of e-commerce, search engines, video streaming services, social media, operation system software and advertisement platforms.

Corporate fines would rise to 8 percent of annual revenue from their current 6 percent, and companies would be subject to a stronger burden of proof regarding business practices suspected to be anticompetitive. The FTC would be empowered to order a temporary halt on business activities deemed anticompetitive as well.

One of the most notable changes from the previous plan concerns the method by which the regulator will select which companies are subject to its stricter rules.

Rather than applying its new standards to specific Big Tech firms designated in advance, as was previously proposed, the FTC now plans to determine the set of rules to which a company is subject, taking into account its size, after allegedly anticompetitive activities occur.

“The FTC previously considered predesignating the companies [subject to stricter regulations] but received much feedback from experts, industry insiders and relevant government agencies pointing out that such measures may result in excessive costs and burden on service providers,” said FTC Chairman Han Ki-jeong during a news conference at the Sejong government complex Monday.

The bolstered rules will apply only to platform operators with “market dominance” — that is, either a single company holding a market share greater than 60 percent with more than 10 million monthly active users or three or fewer companies with a combined market share greater than 85 percent counting more than 20 million monthly active users each.

All companies with less than 4 trillion won in annual revenue will be exempt from the strengthened rules.

Four to seven companies, including Naver and Kakao, are expected to qualify for the heightened scrutiny.

The FTC also announced a plan to revise the Act on Fair Transactions in Large Franchise and Retail Business, a move aiming to address the recent 1.3 trillion won ($966.4 million) payout delay from Qoo10-owned marketplaces.

The agency plans to require major online marketplaces to comply with the same regulations that currently govern large retail businesses, including policies that obligate them to manage settlements for sellers separately [from what?] and impose strict deadlines on their resolution. Procedures for determining which e-commerce platforms will be subject to such regulation will be announced later on.

The FTC said that it would work closely with lawmakers to put the proposal up for legislative proceedings promptly.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]