[2020 National Audit] Seongwook Jo "Google In-App Payment Controversy, Action Plan Report Before Comprehensive Audit" (Summary)

Investigating Two Google Cases... "Will Conclude Soon"
Regarding 30% Commission Policy, "Investigating Anti-Competitive Behavior"
Lee Yoon-sook, Naver Shopping CEO, "Considering Legal Action by Fair Trade Commission if Necessary"

Fair Trade Commission Chairman Cho Sung-wook appeared at the National Assembly's Political Affairs Committee on the 8th for the National Audit of the Fair Trade Commission and delivered a work report. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Joo Sang-don and Moon Chae-seok] Cho Sung-wook, Chairman of the Korea Fair Trade Commission (KFTC), recently announced that he would report the action plan regarding the controversial 'Google In-App Payment (30% commission fee) mandatory policy' before the comprehensive audit session.

"Google measures to be reported even before the comprehensive audit"

On the 8th, Chairman Cho appeared at the National Assembly's Political Affairs Committee audit and responded "Understood" to the question from Lee Yong-woo, a member of the Democratic Party of Korea, who requested, "Please report the KFTC's action plan regarding the Google issue (30% commission fee) even before the comprehensive audit."

Separately, Chairman Cho stated, "The two ongoing investigations related to Google will be submitted for deliberation soon," and added, "Regarding the 30% commission fee policy, we are investigating whether there are any anti-competitive or competition-hindering acts to restore competition."

Previously, in 2013, the KFTC concluded no charges regarding allegations that Google forced the pre-installation of the Google search app on its OS, but it began a re-examination in October 2016. The KFTC believes that Google prohibited manufacturers such as Samsung and LG from installing competing OSs and forced domestic mobile game developers and distributors to release apps only on the 'Google Play Store.'

Regarding the recently announced 'Online Platform Fairness Act,' Chairman Cho explained, "As the importance of platform businesses grows, unfair practices are also increasing. If the Online Platform Fairness Act is enacted, it will help address areas not covered by existing laws."

On the merger and acquisition (M&A) case between Baedal Minjok, the number one delivery app market player, and Yogiyo, the second, he said, "The KFTC's Mergers and Acquisitions Division is investigating the Baedal Minjok case. The proposal will be submitted as soon as possible," and added, "We hope to handle it within this year."

During the audit, there was also a demand for the summons of Lee Hae-jin, founder of Naver and Global Investment Officer (GIO). Seong Il-jong, a member of the People Power Party, said, "The KFTC sanctioned Naver for preferential treatment of its own company, which is a serious issue that disrupts the market and obstructs other businesses," and requested, "I understand that GIO Lee is currently in Japan, but I ask him to voluntarily appear at the audit and clarify the allegations in detail."

Earlier, on the 6th, the KFTC decided to issue corrective orders and impose fines totaling 26.7 billion KRW on Naver for continuously adjusting and changing its search algorithm to unfairly favor its own shopping and video services, thereby manipulating search result rankings.

"Did I contribute to Hanwha's no-charge decision? A very insulting remark"

Chairman Cho strongly denied the allegation that his role as an outside director at Hanwha influenced the KFTC's no-charge decision regarding Hanwha.

In August, the KFTC investigated Hanwha affiliates for allegedly unfairly channeling profits to Hanwha S&C (now Hanwha Systems) from 2015 to 2017 but ultimately decided no charges were warranted.

Park Yong-jin, a member of the Democratic Party of Korea, said, "There was suspicion that Chairman Cho's experience as an outside director at Hanwha from 2010 to 2013 influenced the no-charge decision on Hanwha S&C's group preferential treatment."

Chairman Cho responded, "I can confidently say that as an independent outside director, I contributed to improving Hanwha's governance and internal control systems," and added, "Saying I contributed to Hanwha's no-charge decision is a very insulting remark." He further stated, "I did not intervene at all during the deliberation process and did not attend the deliberations while the case was being discussed."

Regarding concerns that current and former KFTC officials join large law firms and act as 'lobbyists,' he replied, "I have never individually evaluated such matters."

Park asked, "Former KFTC chairmen Kim Dong-soo (Doosan Heavy Industries), Noh Dae-rae (Helixmith), and Jung Ho-yeol (JS Corporation) have become outside directors of listed companies, and former and current lawmakers enjoy privileges in regulated companies, leading the public to criticize the KFTC as a 'clubby Fair Trade Commission' or 'Unfair Commission.' What is your opinion?"

Chairman Cho said, "I have never individually evaluated what roles former chairmen and vice-chairmen play as outside directors in companies, so I cannot provide a sufficient answer," and added, "I will never do anything that harms the KFTC regarding my personal affairs."

He has expressed his intention to return to a professorship at Seoul National University after his retirement.

Lee Yoon-sook, CEO of Naver Shopping: "We did not manipulate search rankings"

Lee Yoon-sook, President of Naver Shopping, appeared as a witness at the National Assembly's National Policy Audit on the Fair Trade Commission held by the Political Affairs Committee on the 8th, drinking water as if feeling anxious. Photo by Yoon Dong-ju doso7@

"Contrary to the investigation results announced by the Fair Trade Commission, we did not manipulate shopping search rankings. I cannot agree with the part about manipulation in the investigation results. I believe the fines are unfair, and if necessary, we are considering legal action."

Lee Yoon-sook, CEO of Forest CIC, responsible for Naver Shopping, stated this while appearing as a witness at the audit.

Democratic Party member Oh Ki-hyung asked, "It seems that the KFTC investigation and actions were taken because you did not approach and treat all additional service content providers neutrally and objectively. Was there no internal discussion?"

CEO Lee replied, "As a platform operator, we started the 'Smart Store' business with the intention of providing a good platform for small business owners," and added, "We use the same ranking algorithm equally with open markets, home shopping, and other shopping malls."

Oh asked, "There is a social issue about how Naver, which exclusively manages and uses all business platform information, will share profits with other open market competitors. Are you willing to review this together?"

Lee responded, "If there is a good proposal, we are willing to review it together," and emphasized, "What I want to say is that, contrary to what the KFTC said, we did not manipulate shopping search rankings. I cannot agree with the manipulation part."

People Power Party member Yoon Jae-ok asked, "Do you not acknowledge the KFTC's investigation announcement?" Lee replied, "No. We did not manipulate shopping search rankings," reaffirming her position.

When Yoon asked, "If you did not manipulate, is the KFTC falsely accusing you?" Lee explained, "No. The process of improving shopping search quality and ensuring various shopping malls appear in search results may look like manipulation."

Yoon asked, "Do you think the fines imposed by the KFTC are unfair?" Lee answered, "Yes, I think they are unfair," and added, "If necessary, we are considering legal action."