Gov’t steps back from introducing new Platform Act

[Photo by Yonhap]

The South Korean government has stepped back from introducing new regulations to block the unfair practices of large online platform companies. Instead of enacting a new Platform Fair Competition Promotion Act (Platform Act) that pre-designates the companies subject to stricter regulations, the government opted to address the issue by amending the existing Monopoly Regulation and Fair Trade Act, with a focus on tightening regulations on major online platforms with harsher penalties and a stronger burden of proof after alleged anticompetitive activities occur.

While this decision reflects platform companies’ opinions, concerns remain about Korean competition authorities’ effectiveness in regulating overseas big tech companies.

The Korea Fair Trade Commission (KFTC) announced this legislative direction for promoting fair competition in the platform industry on Monday and reported it to a government-party consultative meeting.

“Anti-competitive behavior by monopolistic platforms, such as blocking competitors from entering the market or driving them out, is still rampant,” KFTC Chairman Han Ki-jeong said during a news conference at the Sejong government complex on Monday. “We will respond swiftly and effectively to the harm caused by monopolies in the rapidly changing platform market.”

The targets of the tightened regulations are large platforms in six sectors: brokerage, search, video, social networking services (SNS), operating systems, and advertising. These platforms will be prohibited from engaging in four major anti-competitive practices: self-preferencing, bundling, restricting multi-homing (simultaneous use of multiple platforms), and demanding preferential treatment.

Violations could result in fines of up to 8 percent of the revenue generated from such illegal activities and a ‘temporary suspension order’ which halts such activities until the penalties are finalized.

Companies accused of any of the four prohibited acts will also bear the burden of proving that their conduct did not restrict competition.

However, the KFTC will no longer pursue its previously proposed ’pre-designation‘ of large platforms, which was aimed at preventing illegal activities and swiftly handling cases.

“Periodic investigations will allow us to prevent anticompetitive activities and swiftly handle such cases, which will significantly improve the speed and effectiveness of law enforcement,” Han said.

Industry insiders expect that companies such as Naver Corp., Kakao Corp., Google LLC, and Apple Inc. will be among those subject to strengthened sanctions.

But concerns persist over whether investigations into overseas big-tech companies will be effective. Industry insiders are concerned that Korean firms could be the primary targets as investigations into foreign companies are likely to proceed more slowly.