[Platform Power Abuse] "Coexistence Over Monopoly"... Companies Leading the Way in Commission Reduction

Planning - Abuse of Power by Platforms in the COVID Era (Part 2)

Commission Reduction Moves Should Serve as a Catalyst for Market Competition
Platform Winner-Takes-All Closely Watched in the National Assembly

[Asia Economy Reporter Seulgina Jo] As issues arising from the winner-takes-all dominance of giant platforms, such as excessive fees and advertising cost pressures, become more prominent, companies that are proactively deciding to lower fees are gaining attention.

While the 'app market giant' Google Play has been embroiled in controversy over the so-called ‘30% app toll fee,’ One Store’s move to implement a groundbreaking fee reduction policy targeting small and medium-sized enterprises stands out. In the e-commerce industry, including Wemakeprice and Tmon, a lowest-fee competition to attract sellers has also ignited. These moves are interpreted as efforts to expand market presence against the powerful platform giants while promoting ecosystem development through ‘win-win’ cooperation.

[Platform Power Abuse] "Coexistence Over Monopoly"... Companies Leading the Way in Commission Reduction

◆ Platform Companies Lowering Fees

According to the industry on the 13th, One Store, which holds about a 10% market share domestically, has been lowering app market fees since 2018 and has been implementing a policy since last October that halves fees for businesses with monthly transaction amounts under 5 million KRW. This applies to all content listed on One Store, including games and apps, benefiting more than 16,000 companies.

One Store’s approach has attracted even more attention amid global controversies over excessive app fees charged by global app market giants like Google and Apple. Launched in 2016, the native app market One Store charges a 20% app fee, significantly lower than Apple App Store and Google Play’s 30%. It also does not force in-app payment (IAP) systems, which have been criticized as toll fees. Instead, it has implemented a groundbreaking policy that reduces fees to 5% if developers use their own payment systems. Microsoft (MS), a global company, has also decided to reduce the game fees from 30% to 12% starting this August for games listed on the MS Store, its app market for Windows Mobile.

In the fiercely competitive domestic e-commerce industry, a fee reduction war has recently ignited. The most aggressive player is Tmon. Ranked 7th in market share, Tmon started a ‘negative fee’ policy on the 1st of last month. Not only does it waive the approximately 3% payment agency fee for products listed in the single-item registration category, but it also refunds an additional 1% to sellers.

Wemakeprice also implemented a policy fixing the sales fee at 2.9% starting from the 21st of last month. This lowers the fee rate to about one-fifth of the industry average (13.6%). It shifted from the conventional practice of open market operators charging differentiated fees by product category to a flat-rate fee policy. This is operated as a fixed model, not a temporary promotion.

Additionally, travel platform Trapvitoz and others have further reduced reservation agency fees to share the pain and promote coexistence with the lodging industry amid the prolonged COVID-19 situation. Park Sung-joong, a member of the National Assembly’s Science, ICT, Broadcasting and Communications Committee from the People Power Party, evaluated, "Amid fierce conflicts caused by excessive fees from platform giants, the fee reduction moves by some companies are a positive sign for restoring market competition."

◆ Will Fee Competition Against Monopoly Platforms Expand?

Inside and outside the industry, there is a consensus that it is important for the fee reduction movement initiated by some platform companies to lead to revitalized market competition.

Corporate inquiries about One Store as an alternative after the app toll fee controversy have also increased in the same context. One Store’s growth rate in the first quarter of this year was 35.2%, about 4.5 times higher than the 7.9% growth rate of other app markets. One Store’s domestic market share, which was in the low teens early last year, surged sharply in the second half as the app toll fee controversy spread, approaching 20%.

If One Store charged the same fees as Google and Apple, its additional annual revenue is estimated to exceed 100 billion KRW. Earlier, Lee Jae-hwan, CEO of One Store, emphasized that the fee reduction decision was made from the perspective of ecosystem coexistence, stating, "The fee burden is heavy for companies."

Wemakeprice is also seeing immediate market responses. In the ten days following the announcement of the new fee policy, the number of new vendors increased by 33.2% compared to the same period last year. The total number of vendors also rose by 22.2% compared to a year ago. A Wemakeprice official said, "The new fee policy is part of the evolution into a shopping platform," adding, "We will focus on establishing a virtuous cycle in the long term without being obsessed with short-term results."

The negative effects of winner-takes-all dominance by giant platforms are also a concern in the National Assembly. Rep. Park said, "The problem is that market competition is difficult because of monopoly platforms," and criticized, "They should not make excessive profits." He added, "Many small and medium-sized companies and self-employed people are dissatisfied with high fees, and platform behavior toward vendors is continuously being monitored, so this issue is being examined in the National Assembly," urging leading domestic companies such as Naver and Kakao to take the lead in improvements.

Rep. Han Jun-ho of the Democratic Party also said, "Platform business is a ‘marketplace’ that connects good services to consumers. However, giant platform companies are becoming the dominant party," and pointed out, "Rather than exploiting the market after gaining dominance, they should approach it from the perspective of providing better services."