[The Editors' Verdict] Legitimacy of Online Platform Regulatory Legislation

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management and Director of the Technology Law Policy Center

With the prolonged COVID-19 pandemic leading to a rapid growth in the non-face-to-face transaction market, the transaction amount of online shopping malls, which was 25 trillion won in 2010, increased more than sixfold to 161 trillion won last year. As a result, platforms such as global giants Amazon and Google, as well as domestic platforms like Naver, Kakao, Coupang, and Danggeun Market, are experiencing rapid growth. Consequently, regulatory discussions have continued due to issues such as power abuse by platform tenants and consumer complaints, recently escalating into legislative battles between government ministries.

The Fair Trade Commission’s Online Platform Intermediary Transaction Fairness Act and the Korea Communications Commission’s Online Platform User Protection Act are examples. Both laws aim to make the platform market fair and reduce consumer harm by introducing regulations related to contracts and unfair practices. However, while the Online Platform Intermediary Transaction Fairness Act mainly governs platforms centered on open markets and their tenants, the Online Platform User Protection Act is more comprehensive, covering search engines and social networking services (SNS), and regulating not only tenants but also platforms and consumers.

Since such regulatory laws may infringe on citizens’ freedom of business and property rights, certain legal requirements must be met. According to the legislative drafting review standards, necessity of legislation, legitimacy and legal conformity of legislative content, and harmony are required, and the Constitutional Court mandates adherence to the principle of proportionality. The principle of proportionality means that when legislation restricts citizens’ freedoms and rights, the restriction must be proportional to the public interest sought by limiting fundamental rights. Specifically, it is a four-step test: the purpose must be legitimate (legitimacy of purpose), the method must be appropriate (appropriateness of means), the restriction of fundamental rights must be minimized (minimal infringement), and the public interest to be achieved must outweigh the private interests infringed (balance of interests).

What would be the result if both laws were reviewed according to these standards? First, the legislative purpose of protecting tenants and consumers using platforms can be considered legitimate. Next is the appropriateness of means. The means introduced in both laws include ex-ante regulations such as contract drafting, delivery, notification of contract changes, and disclosure of search exposure criteria, as well as ex-post regulations such as prohibition of unfair practices. Among these, there is doubt whether the introduction of ex-ante regulations falls within the essential duties of the Fair Trade Commission and the Korea Communications Commission, which are ex-post regulatory agencies under general competition law and ICT-specific competition law, respectively. There is also criticism that ex-post regulations could be achieved through amendments to existing laws such as the Fair Trade Act or the Telecommunications Business Act.

This ultimately raises questions about whether both laws are politically necessary and, furthermore, whether norm-setting is required. It concerns whether the risks, which are necessary and sufficient conditions for norm establishment, have been sufficiently confirmed as evidence, such as consumer harm cases caused by Facebook’s routing changes under the Telecommunications Business Act platform regulations or the Nth Room case. Meanwhile, while the European Union’s regulatory introduction mainly aims to check global companies, domestic regulatory introduction should also be examined to ensure it does not weaken the competitiveness of native platforms. In the United States, platform regulation discussions continue following the House of Representatives’ antitrust report, but they remain at an early stage of investigation and research rather than advancing to full legislative stages.

In conclusion, given that it is difficult to accept the legitimacy of both laws based solely on the two-step test, it is necessary to proceed with fact-finding, evidence collection, and opinion gathering over a longer period. It is important to note that if unnecessary regulatory competition among state agencies overheats into a territorial battle, the resulting damage will ultimately fall on businesses and citizens.

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management and Director of the Technology Law Policy Center