[Reverse Discrimination Caused by Regulation] Google and Facebook Run Rampant... Only Domestic Companies Shackled in Korea

[Image source=Yonhap News]

[Asia Economy Reporter Seulgina Jo] "In the end, it will only result in disclosing the trade secrets of domestic companies." "It's not that we refuse to pay taxes or funds. We just want to be able to compete on equal footing with overseas companies."

The sighs of domestic companies caught in the midst of the COVID-19 pandemic are growing deeper. There are concerns that the simultaneous regulations that have poured out since the beginning of the year will once again tighten only on domestic companies. In this process, discrimination against overseas operators has become more apparent, leading to complaints that "discrimination has become the norm." While domestic companies are stifled by regulations and stuck in a rut, global giants like Google and Netflix, which have evaded legal restrictions, are aggressively dominating the Korean market.

According to the government and industry on the 3rd, there are concerns that the COVID-19 profit-sharing system and online platform-related bills currently being promoted by the government and the National Assembly could inadvertently impose sanctions only on domestic companies, further intensifying discrimination against overseas companies. Looking at most of the regulations currently being pursued, such as the disclosure of search algorithms, enforcement against overseas operators has not been properly secured. ▶See related article on page 5'Naver and Kakao trapped by regulations'

Kim Jaehwan, Director of Policy at the Korea Internet Corporations Association, pointed out, "There are concerns that this will ultimately have the adverse effect of causing domestic companies to lose their innovative growth momentum." Although the profit-sharing system emphasizes the principle of voluntary participation by the private sector, it is expected to create a ‘semi-compulsory profit recovery’ atmosphere targeting domestic companies. An industry insider questioned, "Will the profit-sharing system also apply to Google and Netflix, which made a lot of money during the COVID-19 crisis?"

Controversies over discrimination against overseas operators recur every year. This issue is spreading across industries including ICT, used cars, distribution, and gaming, leading to sarcastic remarks that "Korea is a country where native companies find it hard to survive." This is why, a year ago, Kim Taekjin (NCSoft) and Lee Haejin (Naver), representatives of the first generation of venture entrepreneurs, made candid remarks when meeting President Moon Jae-in, saying, "At least we want equal application."

Overseas operators are criticized for avoiding taxes by exploiting loopholes in the tax system while making huge profits in the Korean market. Last year, when the National Tax Service imposed a 600 billion won corporate tax on Google, the company instead filed an objection, sparking controversy. Netflix and Facebook also earn money based on Korea’s excellent ICT infrastructure without even paying network usage fees. Despite the YouTube outage lasting over an hour, there was neither compensation nor user notification. This contrasts with domestic companies that pay hundreds of billions of won annually in network usage fees and strive to protect users promptly.

As such discrimination becomes entrenched, criticism arises that it ultimately blocks market competition and encourages the bullying behavior of global giants. Previously, Apple was able to shift iPhone repair and advertising costs onto domestic telecom companies, and Google Play announced it would take a whopping 30% commission on app market fees, both stemming from their overwhelming market dominance in Korea.

Experts agree that before the government and National Assembly impose regulations that strangle domestic companies, the tilted playing field must be corrected first. Kim Hyunkyung, a professor at the Graduate School of IT Policy at Seoul National University of Science and Technology, said, "Everything needs to be reviewed from zero base," adding, "We must be cautious when introducing regulations that do not exist anywhere else in the world proactively in Korea." Securing enforcement power to bring overseas operators within the regulatory framework is also an important task. Choi Kyungjin, a law professor at Gachon University, said, "If the regulations are necessary and reasonable, they should be started," but pointed out, "The key is to enhance enforcement and effectiveness."

The upcoming election season is also one of the factors increasing regulatory uncertainty. An industry insider said, "Regulations that impose strict standards only on domestic companies are short-sighted corporate policies," and expressed concern that "economic logic might become more entangled in politics during the election season."