[W Forum] Are European Regulations on US Big Tech Companies Our Compass?

The whole world is on high alert over competition among online platforms. In particular, online platforms have become the core of the ‘contactless ontact’ industry with the advent of the post-COVID era. Amid this, the market dominance by the US GAFA (Google·Amazon·Facebook·Apple) is a recurring issue for regulatory agencies worldwide. Especially, the EU has been issuing regulations aimed at various public interests such as personal data protection, fair competition, national security, and digital taxation. However, these regulations ultimately aim to curb the dominance of US big tech companies in the EU market.

Yet, it has not been verified whether these regulations have achieved their original objectives. For example, in May 2018, the EU implemented the General Data Protection Regulation (GDPR) as a common standard for personal data protection. This was intended to check US companies and secure data sovereignty for the EU. It was expected that the cost of GDPR compliance would reduce the presence of US companies in the European market. However, after the GDPR implementation, the revenues and user numbers of Google and Facebook have actually increased. According to data released by Mobile Marketer in January 2019, Facebook’s Q4 2018 revenue rose by 61% compared to the same period the previous year. In other words, contrary to the intent of GDPR, market concentration of Google and Facebook in Europe has rather been strengthened.

Another example is France’s digital tax. The French government adopted a measure last July to impose a 3% digital tax on revenues generated by providing goods and services to French consumers over the internet, even if the company has no physical presence in France. Naturally, this targets US big tech companies like Google and Facebook. In response, the US announced plans to impose a 25% tariff on French products worth approximately $1.3 billion (about 1.46 trillion KRW). Ultimately, from the perspective of the entire national economy, it is a case of ‘six of one, half a dozen of the other.’

What is most concerning in this situation is our response. Our circumstances differ from Europe’s. First, our market size is small. Europe can leverage its massive market size to pressure US companies through regulatory enforcement, but we are not in such a position. Europe lacks domestic businesses that can compete with US big tech companies. Therefore, strong regulations targeting US companies can be justified under the pretext of protecting domestic industries. However, we have competitive native platform companies. Nevertheless, until now, Korea’s online platform regulations have been one-sided and inequitable, applying only to our companies while leaving foreign competitors untouched. As a result, US big tech companies like Google and YouTube have been able to preempt the Korean market.

Meanwhile, the powerful regulatory authority, the Korea Fair Trade Commission, continues to wield its regulatory sword only against our companies without considering these differences. It has announced the draft of the ‘Online Platform Fairness Act’ and imposed fines on Naver Real Estate and Shopping for abusing their market-dominant positions. On the other hand, regarding Google’s act of signing contracts with domestic telecom companies to set Google Search as the default search provider and excluding competing services (Naver, Daum) from pre-installation, the Commission decided ‘no charges’ in 2013.

In fact, on the same issue, the US Department of Justice filed a lawsuit in federal court on the 20th (local time) against Google for unfair practices. Moreover, as every year, this year’s National Assembly audit is focused solely on scolding domestic companies. At this point, it is difficult to tell whether Korea’s regulatory agencies are friend or foe. Can our companies survive in the global online platform market entering the main stage? Under the government’s pressure on domestic companies, there is concern that even native platforms may disappear.

Kim Hyun-kyung, Professor at Seoul National University of Science and Technology