Fair Trade Commission Tightens Grip on Naver's 'Shopping and Video' Services... Backlash Against 'Galapagos-Style Regulation'

Naver Real Estate Fine Followed by Shopping and Video Investigations
Growing Concerns Over Reverse Discrimination Among Domestic and Foreign ICT Companies

[Asia Economy Reporter Jin-gyu Lee] The Fair Trade Commission (FTC) is facing criticism for "Galapagos-style regulation" as it extends its scrutiny from Naver Real Estate to shopping and video businesses. Despite the cross-border nature of internet services, as seen in the case of YouTube dominating the online video market, the FTC is imposing regulations limited to the domestic market. This has raised concerns that domestic services may be unfairly disadvantaged in the survival game that transcends national borders.

FTC Discusses Sanctions on Shopping and Video Following Naver Real Estate

According to the information and communication technology (ICT) industry on the 7th, the FTC is investigating whether Naver abused its dominant position in its shopping and video businesses. The investigation began after eBay Korea, which operates online shopping malls such as Auction and Gmarket, filed a complaint against Naver in 2018. Industry insiders expect the FTC to announce its conclusion on the Naver Shopping investigation within this month. Additionally, there is an ongoing investigation into allegations that NaverTV was given preferential exposure over YouTube or AfreecaTV when searching for videos on Naver. The FTC announced yesterday that it imposed a corrective order and a fine of 1.032 billion won on Naver for violating the Fair Trade Act by blocking information provision to Kakao. This was the first sanction since the FTC formed a dedicated ICT team in November last year.

Regarding this, an industry official said, "When determining market dominance, the outcome varies depending on how the market is defined?whether only domestic online shopping malls are considered, whether companies including search services like Naver and Kakao are included, or whether overseas e-commerce companies like Amazon and Alibaba are also included. Given the increasing use of overseas e-commerce, judging market dominance based solely on the domestic search market is unreasonable." He added, "Regarding the video business, global OTTs like YouTube and Netflix are encroaching on the domestic market, so it is questionable whether market dominance can be assessed based on portal search rankings."

In fact, global OTTs such as Netflix and YouTube hold an 80% market share domestically, while native OTTs like Wavve and NaverTV lag behind with around 20%. Naver explained its stance on the Naver Real Estate sanctions by stating, "The information the FTC criticized as 'not being provided to third parties' refers to the 'verified listing information' service of Naver Real Estate, which Naver developed in 2009 at a cost of several hundred million won to eradicate false listings, the first of its kind in the industry." It emphasized, "If the results of innovation and effort that have earned user choice are ignored and free-riding is tolerated, innovation will disappear in the long term, and all competitors will expect free-riding. We will consider legal and institutional measures to protect our legitimate rights and ensure the healthy growth of real estate information services."

Industry Voices Concern Over Reverse Discrimination Between Domestic and Foreign ICT Companies

Regarding sanctions against Naver, voices from the industry express concerns about reverse discrimination between domestic and foreign ICT companies. They argue that regulations should not be applied first simply because a company is domestic. Professor Jeong Hyun-woo of Chung-Ang University explained, "While sanctions against monopolies of ICT companies in Korea are being strengthened, there are doubts about the effectiveness of sanctions against global ICT companies like Google and Apple, leading to issues of reverse discrimination against domestic companies. Many global ICT companies do not have servers in Korea and exploit loopholes in domestic laws, ignoring government summons, so domestic regulations are not properly enforced. Overcoming this dilemma is a major challenge for our government."