[2020 National Audit] 'Naver Shopping Search Manipulation' Dispute... Han Seong-suk "Legal Action" (Summary)

Han Seong-sook, CEO of Naver, is appearing as a witness at the comprehensive audit of the Office for Government Policy Coordination and others during the Political Affairs Committee meeting held at the National Assembly on the 22nd. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Buaeri] The National Assembly's Political Affairs Committee hearing held on the 22nd focused heavily on Naver's 'search algorithm manipulation allegations' and Google's 'mandatory in-app payment and 30% commission policy.'

Naver "Disagreement with Fair Trade Commission's Disposition"

Han Seong-sook, CEO of Naver, appeared as a witness before the Political Affairs Committee and stated that there is "disagreement" regarding the Fair Trade Commission's imposition of a 26.7 billion KRW fine.

When Yoon Jae-ok, a member of the People Power Party, asked, "Do you acknowledge the Fair Trade Commission's announcement that Naver manipulated its algorithm to favor its own shopping mall?" she responded accordingly.

Han said, "We will provide explanations on necessary parts," adding, "We are internally reviewing legal responses."

Earlier, the Fair Trade Commission imposed a fine of 26.7 billion KRW on Naver for manipulating shopping and video search results to increase the market share of its own services, causing damage to competitors and consumers.

Han explained, "At that time, only open market-centered products appeared, so exposure of small and medium-sized merchant malls was not possible," adding, "We gave much thought to how to display a variety of products and reviewed that aspect."

Han also drew a line by stating that "Google and Naver are different" regarding Google's 2.4 billion euro fine in the European Union (EU) in 2017 for placing its own shopping service search results at the top.

There were also claims that Naver, as a search operator, should not be allowed to operate shopping businesses.

On the same day, Oh Ki-hyung, a member of the Democratic Party, said, "Naver is a platform operator and should restrict businesses like shopping that have conflicts of interest," and pointed out, "If shopping and search functions are operated by one company, institutional improvements are needed, such as installing a 'Chinese Wall' (blocking information exchange within the company) and imposing punitive damages for violations."

The issue of manipulation of news search algorithms was also raised. Yoon asked about the news manipulation allegations, "Is there no human involvement?" Han replied, "In the first National Assembly hearing, humans were editing, but that part has now been improved," emphasizing AI editing once again.

Lim Jae-hyun, Executive Director of Google Korea, appeared as a witness at the comprehensive government audit on the Office for Government Policy Coordination held at the National Assembly's Political Affairs Committee on the 22nd, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

"Google is Becoming the Devil... Damaging Market Competition"

Google, which announced the mandatory in-app payment and 30% commission policy, was also heavily criticized by lawmakers from both ruling and opposition parties.

Google announced that starting from October next year, all payments made when using apps distributed through Google Play must use its own system (in-app payment), and a 30% commission will be deducted. This policy, previously applied only to game apps, is now being extended to content areas such as music, videos, and webtoons, drawing public criticism.

Lee Young, a member of the People Power Party, indirectly criticized by quoting Google's motto 'Don't be evil,' saying, "Google's motto seems to have become 'Must be evil.'" Lee pointed out, "If the commission increases by 30%, in plain terms, the ones benefiting are Google and the three telecom companies," adding, "And those who suffer are consumers and small businesses."

Min Hyung-bae of the Democratic Party also said, "(Google) said it would normalize the ecosystem through mandatory in-app payments, but in my view, it is ecosystem destruction."

Fair Trade Commission Chairman Cho Sung-wook also added his opinion to the lawmakers' criticisms. Chairman Cho said, "From the Fair Trade Commission's perspective, Google has engaged in acts that damage market competition," and added, "A major reason Google could introduce such a policy is the lack of competition in the app market," stating, "The Fair Trade Commission will investigate this matter."

Google Does Not Back Down

Im Jae-hyun, Managing Director of Google Korea, who appeared as a witness before the Political Affairs Committee, did not back down despite the lawmakers' criticisms.

Im emphasized that not many companies are affected by Google's in-app payment policy introduction.

He explained, "Only about 100 developers in Korea are affected," adding, "Already, about 97% of developers comply with in-app payments."

Im also denied the claim that Google Play's domestic sales reach 6 trillion KRW. He explained, "According to App Annie, sales are around 1.4 trillion KRW."

Regarding the six-month policy delay only in India, he added, "It takes time to integrate the payment system with the Google Play system because the payment system is different."

When Min pointed out that "Google is neglecting harmful search results for teenagers," Im countered, "The search algorithms differ between domestic and global markets," adding, "We are receiving evaluations from the government that improvements are being made."