Tense Over Potential Exposure of Trade Secrets
Concerns Over Possible Reverse Discrimination Against Domestic Companies
Worries About Expansion to Algorithm Disclosure
[Asia Economy Reporter Buaeri] The enactment bill of the "Act on the Fairness of Online Platform Intermediated Transactions (Onple Law)" passed the Cabinet meeting on the 26th, raising concerns in the platform industry, including Naver and Kakao, that trade secrets may be exposed. There are also criticisms that the law enforcement possibility is lower for overseas companies such as Google, which could lead to reverse discrimination against domestic companies.
According to the Fair Trade Commission, the Onple Law passed on this day requires platform operators and tenant companies to mandatorily prepare and deliver contracts. The contract must include the service content and compensation, service commencement, restriction, suspension, and change details, product exposure, and damage-sharing criteria. The law applies to businesses that provide services mediating transactions between tenant companies and consumers through online platforms and have sales of 10 billion KRW or more and sales amount of 100 billion KRW or more, as specified by enforcement ordinances. The Fair Trade Commission expects that about 30 platforms, including Naver and Google, and 1.8 million tenant companies will be subject to this law.
The problem is that the items to be specified in the contract include "matters concerning the order, form, and criteria of how goods information is exposed on the online platform." For platform companies whose core competitive means are big data, this is tantamount to disclosing trade secrets. Kim Jaehwan, Policy Director of the Korea Internet Corporations Association (KICA), which includes Naver and Kakao, criticized, "The Onple Law is a law that brings offline regulations unsuitable for online. It assumes that fairness is secured only if platform companies disclose a large amount of information they possess, which is like requiring restaurants to disclose their recipes."
There are significant concerns in the industry and academia about the possibility of expanding disclosure to algorithms. According to Article 9, Paragraph 1, and Article 30, Paragraph 4 of the Onple Law, if an online platform user claims that the algorithm has caused them disadvantage and files a damage compensation claim, the platform operator must comply with submission orders even if the algorithm is a trade secret.
The Onple Law may also cause reverse discrimination against domestic native platform companies. Overseas platform companies such as Google tend to be passive in responding to domestic laws, citing headquarters policies. A representative case is the past "HyunA music video adult certification" controversy. In 2014, the Ministry of Gender Equality and Family issued a guideline to KICA stating that "to watch 19+ content, adult certification must be performed every time the content is viewed." While domestic portal companies complied with this regulation, overseas companies like YouTube did not, inevitably falling behind in the video service competition.
Experts also expressed concerns about the possibility of law enforcement. Professor Lee Seungmin of Sungkyunkwan University Law School pointed out, "It is not easy when overseas companies resist when the government enforces the law. There are cases where it takes a year or more while waiting for headquarters approval," adding, "In the case of the Onple Law, a significant portion of Korean companies are subject to it, and if one side is strongly enforced while the other side is less affected, there is a possibility of reverse discrimination."
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