Fair Trade Commission to Announce Search Exposure Standards and Establish Exclusive Judgment Criteria... Will Platform Regulation Strengthen?

Fair Trade Commission to Announce 'Online Platform Sector Unilateral Conduct Review Guidelines' Next Month
Possibility of Enacting the Online Platform Act Increases if Calls for Stronger Regulation Spread Amid Platform National Audit

[Sejong=Asia Economy Reporter Joo Sang-don] Recently, prompted by incidents such as the 'Kakao Gapjil Case,' the Fair Trade Commission (FTC) is accelerating efforts to establish regulations to strengthen oversight of online platforms. Previously, the FTC proposed the enactment of the 'Act on the Fairness of Online Platform Brokerage Transactions,' which governs the transactional relationships between platforms and merchants, to the National Assembly, and is also pushing for amendments to the 'Act on Consumer Protection in Electronic Commerce, etc.' to reinforce regulations against unfair practices by platforms toward consumers. The last remaining area is regulation of unfair practices that may occur between platforms themselves. To this end, the FTC plans to prepare and announce, as early as next month, draft 'Online Platform Sector Unilateral Conduct Review Guidelines (tentative name)' that will be applied when determining platform monopolization. This is the fastest-moving among various regulatory proposals targeting platforms.

The core of the online platform review guidelines, scheduled for enactment by the FTC next month, is to clearly present the criteria for determining market-dominant businesses. The Monopoly Regulation and Fair Trade Act prohibits abuse of market-dominant positions, and to regulate this, it is necessary first to determine whether a particular business holds a market-dominant position. The Act presumes a business to be market-dominant if a single company’s market share exceeds 50%, or if three or fewer companies collectively hold 75% or more of the market share, and sanctions their 'abuse of market dominance.' Until now, market share was mainly assessed based on sales revenue, but in the case of online platforms, it is difficult to judge actual market share solely by sales revenue. Therefore, going forward, the FTC intends to comprehensively consider factors such as the number of users, number of downloads, number of brokerage transactions, and amount of data held.

The FTC is also pursuing a plan to include specific items that affect product click counts, sales performance, and purchase reviews?which influence online platform search exposure results?in the standard contracts drafted between the platform and merchants. The aim is to specify in the contract the concrete criteria for how product search results are exposed to consumers.

The standard contract is prepared and distributed by the FTC and serves as the standard terms and conditions in the relevant transaction field. Although the use of the standard contract is not mandatory, since it includes all the 'mandatory items to be included at the time of contract conclusion' stipulated in the Online Platform Act, most platform companies will have no choice but to adopt and use it.

The FTC plans to conduct research to determine the essential items to be included in the standard contract. However, it drew a clear line that the search algorithm itself is not subject to disclosure. An FTC official emphasized, "The criteria for determining the order of product exposure that platforms must disclose will be set at the level already disclosed by leading domestic platform companies," adding, "We are asking to include and disclose key transaction conditions such as click counts and sales volume that affect merchants’ sales in the contract, not to disclose the algorithm itself, which is a trade secret."

The enactment of the Online Platform Act, a key issue the FTC is promoting to regulate online platforms, is also expected to gain momentum. A National Assembly official said, "As the protection of platform workers and small business merchants who are tenants has become an issue, both ruling and opposition parties are gearing up to criticize various problems of platform companies ahead of this national audit," adding, "If negative sentiment toward platform companies spreads after this audit, the necessity of enacting the Online Platform Act proposed by the FTC is likely to be highlighted."