Naver faces growing regulation pressure for its market dominance

[Photo by Park Hyung-ki]

South Korea’s ruling party has criticized the country’s largest portal, Naver Corp., raising speculation that the government’s online platform regulation is in full swing.

The Yoon Suk Yeol administration has maintained a self-regulatory stance for the industry, but following the antitrust watchdog’s recent scrutiny of online platforms, Lee Chul-gyu, a lawmaker who holds a key position as secretary general of the ruling People Power Party, raised the issue Tuesday in a statement that “Naver has committed fraud against the public,” suggesting a possibility that regulations could be legislated soon.

What is notable is that Naver was the only platform mentioned in this matter, as it had been frequently associated with Kakao Corp. as the target of platform regulation.

Lee is urging for “law revisions to uproot the practice of companies like Naver taking advantage of its position and passing on damages to others,” calling for “thorough measures to ensure that small self-employed business owners and consumers do not suffer damage.”

Lee criticized Naver’s “arrogant” actions, saying, “I will not overlook Naver’s big brother behavior, which virtually controls South Korea, beyond its monopolistic power.” “Naver’s fake shopping mall reviews have outraged consumers, but only Naver has escaped punishment,” he said.

On March 21, the Fair Trade Commission issued a corrective order and imposed a fine of 140 million won ($108,000) on Korea Beauty & Healthcare Co. and its advertising agency for posting false review ads on Naver’s Smart Store in violation of the law on labeling and advertising. However, Lee claims that Naver, which operates Smart Store, did not receive any penalties.

In December last year, Naver lost a lawsuit against the antitrust regulator although it claimed that it had never manipulated search algorithms to favor Smart Store. The Seoul High Court ruled that discriminatory acts such as placing Smart Store products at the top of search results while lowering those of competing open-market products were present.

The court mentioned that Naver’s conduct amounted to the abuse of a dominant market position. In January, FTC issued online platform monopoly review guidelines to regulate giant online platform operators such as Naver.

Meanwhile, Naver said it is taking proactive steps to protect consumers, adding it will aggressively address the issues that are being raised.