FTC determined to regulate digital plaforms despite industry backlash

The Fair Trade Commission on Thursday reiterated its determination to regulate digital platforms after its bill to promote fair online competition ran into strong protests from industry players and academics.

President Yoon Suk Yeol speaks at the town hall meeting in Seongdong District, eastern Seoul, on Thursday. [PRESIDENTIAL OFFICE]

The Fair Trade Commission on Thursday reiterated its determination to regulate digital platforms after its bill to promote fair online competition ran into strong protests from industry players and academics.

The FTC also promised to strengthen its monitoring of backdoor advertisements on short-form content on major social platforms such as YouTube, Instagram and TikTok.

The bill, tentatively named the Platform Competition Promotion Act, defines large-scale platform operators as dominant players in the digital economy and places them under stricter scrutiny to prevent them from engaging in anti-competitive practices.

“We are discussing various alternatives to the standards [of dominant platform operators] that the industry widely objects to,” the antitrust regulator said on Wednesday during a press briefing held at the government complex in Sejong. “We will further discuss this with academics and industry experts to develop a bill to regulate the big platforms efficiently.”

However, the FTC emphasized that it is not entirely abandoning the option of setting specifications for dominant platform operators.

“We will consider other possibilities, but if we conclude that the labeling will effectively regulate large platforms, then we will push forward with the original bill,” an FTC spokesperson said. However, the regulator did not give a timeline for unveiling the revised bill.

The FTC’s backtracking comes just two months after it began promoting the bill on Dec. 19, claiming that it takes too long for the government body to investigate and regulate platforms under the current Fair Trade Act.

The bill reportedly regulated not only Korean companies but also big U.S. tech companies like Google, Meta and Netflix, though this remained speculation as the regulator had not clearly outlined specific details into what constituted “dominant” platform operators.

Broadly speaking, the bill designated dominant platform operators based on their domestic revenue and the number of users of their search engines, messaging services, cloud services, online advertisements, or marketplaces.

The designated platforms would also be subject to a fine of up to 10 percent of their annual revenue if they engage in one of the following four malpractices: Showing favorable treatment to in-house products or services compared to other competitors; cross-selling its services along with other products as a bundle; preventing multi-homing, the practice of simultaneously connecting to multiple platforms; or favoring its own platform's users above others.

Without the specifications, rumors proliferating online claiming Coupang and Netflix might be dropped from the bill. As it became likely that U.S. tech giants like Google, Meta and Apple would be subject to the law, the U.S. Chamber of Commerce warned that “the government could find itself in a predicament where it is accused of violating trade agreements by arbitrarily targeting foreign companies.”

During the town hall meeting, the FTC also announced changed criteria for regulating major Korean conglomerates, as the number of companies subject to monitoring surged to 82.

Before, companies with over 5 trillion won ($3.77 billion) in total assets were labeled conglomerates based on the 2009 guideline. The FTC plans to change the criteria to their Gross Domestic Product (GDP) share. Based on research last year, the FTC is deliberating on setting the bar of the companies’ percentage of GDP between 0.3 percent and 0.25 percent. The number of conglomerates will decrease to 64 if the criteria are set at 0.3 percent and to 77 if set at 0.25 percent.

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