Under US Pressure... Will the Netflix Act Enforcement Decree Become More Complicated?

Imposing Quality Control Obligations on IT Giants
Enforcement Decree of the Amendment to the Telecommunications Business Act
US Pressure: "Policies Should Not Target Specific Companies"
Key Issue: South Korea's Administrative Power over Google and Netflix
Effectiveness of Domestic Agent System Also in Question

[Asia Economy Reporter Koo Chae-eun] The revision of the Telecommunications Business Act, known as the Netflix Act, which assigns responsibility for managing 'telecommunication network quality' to internet content providers, has become more complicated following expressions of regret from the U.S. Department of State. Naver and Kakao oppose the act citing reverse discrimination, while the U.S. increases diplomatic pressure representing its domestic companies, further entangling the interests involved.

Can the Korean Government Enforce Authority over Overseas Companies?

According to industry sources on the 16th, the core issue of the enforcement decree of this law is whether the government can exercise coercive power over overseas operators. The enforcement decree obliges overseas operators such as Netflix and YouTube to designate a domestic agent to comply with government orders for data submission. It also imposes obligations to secure service stability measures and handle user requests. The law applies to companies accounting for more than 1% of domestic traffic volume, and among the five companies, three (Google, Netflix, Facebook) are American global companies.

However, as the U.S. continues to exert pressure through various channels, it is expected to be difficult for the Korean government to exercise administrative power over overseas operators in the future. Sanctions against foreign companies could escalate into trade disputes with the U.S. Recently, when France announced plans to tax American IT companies including Google, the U.S. retaliated with tariffs on French wine.

The designation of domestic agents is also problematic. The domestic agent system is designed for companies like Google, Netflix, and Facebook to appoint representatives who ensure compliance with Korean laws within Korea. The enforcement decree mandates the designation of agents as a key means to secure enforceability over foreign companies. However, the U.S. has consistently argued that the agent designation may conflict with Free Trade Agreement (FTA) provisions prohibiting local presence requirements. Although the domestic agent system is a universal and general regulation used by major global entities such as the European Union (EU) to protect users, if the U.S. government and American companies refuse to comply, there is no 'target' for corrective measures or sanctions, making enforcement difficult.

Korean Companies Also Demand a Full Review

Domestic companies are also strongly opposed. The Internet Companies Association, including Naver and Kakao, demands a full review of the enforcement decree, citing arbitrary regulatory targets and standards, excessive data submission obligations, potential constitutional violations, and weak sanctions against overseas companies. Given the strong opposition from domestic operators, if enforcement against overseas companies is hindered by U.S. pressure, it will be even harder to justify the law.

Professor Kim Hyun-kyung of Seoul National University of Science and Technology pointed out, "Although there is an agent system, it is not effectively operated for overseas operators in reality," adding, "This part needs to be fixed for the enforcement decree to function properly." Jeong Sang, senior expert at the Democratic Party, said, "Since Korea plays a significant role as an ICT forward base even from the perspective of U.S. companies, it is increasingly recognized as a country where domestic laws cannot be ignored and business must comply," and added, "Through the enforcement decree of this amendment, enforcement power over overseas companies should gradually be exercised."

Meanwhile, American content companies, known as 'data hippos' due to their large traffic generation, account for an overwhelming share of Korea's total traffic. According to the National Assembly’s Science, Technology, Information and Broadcasting Communications Committee, as of August last year, Google (including YouTube) generated 25.8% of the total internet traffic of Korea’s three major telecom companies. Facebook accounted for 4.7%, Netflix 2.3%, while Naver and Kakao accounted for 2.5% and 1.8%, respectively.