Platform Industry: "It's Like Demanding the Disclosure of Secret Recipes from Popular Restaurants"
[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission, which is promoting the ‘mandatory disclosure of search algorithm criteria’ for online platforms, emphasized the necessity of the system and expressed its determination to pass it during this regular session of the National Assembly. However, there is expected to be strong opposition since algorithms are considered trade secrets of platform companies. In next month’s government audit, the possibility of ‘platform operators adjusting algorithms’ is likely to be raised, interpreted as a strategy to strengthen the justification for enacting the On-Platform Act (Onpleob).
The controversy surrounding the disclosure of algorithm criteria is expected to intensify alongside discussions on the enactment of the ‘Act on the Fairness of Online Platform Intermediated Transactions (Onpleob).’ The ruling party intends to prioritize the Onpleob bill in this regular session, and the Fair Trade Commission is also actively supporting the legislation. The core points include imposing obligations to draft and provide contracts between platforms and tenant businesses and prohibiting unfair practices under the existing Fair Trade Act. In particular, as a measure to enhance transparency and fairness in transactions, it requires the disclosure of the algorithm criteria, which are the ‘key variables determining the product exposure ranking.’
Chairman Cho Sung-wook of the Fair Trade Commission also stated upon his appointment in September 2019 that "We must faithfully perform the role of sanctioning unfair monopolistic abuses by ICT operators and others to promote market innovation," targeting monopolistic behaviors of platforms.
Since then, the Fair Trade Commission announced in September last year that "the dominant position of online platforms is strengthening, and concerns about unfair practices against tenant businesses are becoming a reality, but existing policy measures have limitations in effective response," and after the Cabinet meeting in January this year, it submitted the Onpleob bill to the National Assembly.
In particular, remarks by Vice Chairman Kim Jae-shin of the Fair Trade Commission are expected to ignite related discussions. At a recent academic forum on ‘Fairness, Transparency, and Competition Issues of Search Algorithms,’ Vice Chairman Kim warned, "We cannot rule out the possibility that online platform operators may adjust search algorithms in a way favorable to themselves to become winners," and added, "We will strictly respond to acts by core online platform operators, who act as both referee and player, artificially adjusting or distorting rules to favor their own products and services." He emphasized the need for disclosure because, in the digital economy centered on online platforms, exposure rankings determined by search algorithms can be the criteria that separate market winners and losers.
The platform industry is concerned about the clause requiring disclosure of product exposure criteria during searches, saying it is "like demanding the disclosure of secret recipes from popular restaurants." They argue that algorithms are trade secrets of platform companies and cannot be disclosed. A platform company official said, "Disclosing the main criteria for product exposure is like revealing what ingredients go into a dish, and a skilled chef could likely recreate the food sold at popular restaurants after several trials and errors just by knowing the ingredients," adding, "Currently, only the ingredients are required to be disclosed, but later they might demand the disclosure of the proportions of those ingredients as well," expressing strong opposition.
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