Fair Trade Commission Targets Naver... Three Related Cases Under Review

Jongwook Cho, Chairman of the Fair Trade Commission. (File photo)

[Sejong=Asia Economy Reporter Joo Sang-don] The Korea Fair Trade Commission (KFTC) is accelerating the review of three cases related to Naver's unfair practices, drawing attention to the results. Currently, the KFTC is conducting sanction procedures against Naver for abusing its market dominance in the real estate, shopping, and video sectors. The main target of the "Act on the Fairness of Online Platform Brokerage Transactions," which is aimed to be enacted in the first half of next year, is also Naver.

On the 13th, an industry insider said, "The KFTC will soon decide the level of sanctions against Naver's unfair practices in the real estate, shopping, and video sectors."

Previously, in November last year, the KFTC sent a review report (equivalent to a prosecutor's indictment) to Naver. The KFTC is known to have judged that Naver, using its dominant position as the number one search market player, favored its own shopping, real estate, and video services over competing services within its portal. Naver is accused of operating its system so that real estate listings are shown through Naver Real Estate and videos are more exposed on Naver TV compared to other video services like YouTube or AfreecaTV during searches. In the case of shopping, when searching for specific products with keywords on Naver, it is alleged that Naver prioritized its own Smart Store or products registered with Naver Pay at the top of the search results, thereby hindering fair competition. The related industry expects that Naver will not be able to avoid corrective measures and fines imposed by the KFTC.

Recently, the KFTC has been promoting the enactment of the "Platform Fairness Act" to eradicate unfair practices by online platforms. Naver and Baedal Minjok are within its scope. The KFTC is concerned that monopolistic platforms that have dominated the market may hinder the entry of new platforms and eliminate potential competitors through mergers and acquisitions (M&A), thereby impeding competition. It also views that platforms are likely to shift burdens onto tenant businesses by exploiting their dominant position. Although various unfair issues have arisen involving tenant businesses, consumers, and competing platforms due to the emergence of platforms, there are limitations in law enforcement under existing laws, prompting the creation of a separate law. Unlike general manufacturing industries, platforms have a complex and multi-layered stakeholder structure involving tenant businesses, platforms, and consumers in a multi-sided market. Meanwhile, platforms are excluded from the Large-Scale Distribution Act as intermediaries, and it is often difficult to recognize transactional status in the relationship between platforms and tenant businesses, making it challenging to sanction unfair trade practices under the Fair Trade Act. If the Platform Fairness Act is enacted, the KFTC will be able to intervene as long as a transactional relationship is established, regardless of the transactional status, i.e., the "gap-eul relationship."

Along with this, the KFTC plans to supplement the limitations of the current review guidelines based on traditional transaction practices and establish the "Platform Sector Unilateral Conduct Review Guidelines," which reflect the multi-sided characteristics. This will serve as a kind of guideline indicating which platform behaviors constitute unfair trade practices.