[Big Tech on the Test Bench] Strong Sanctions by US, China, Japan, and EU... "Must Prevent Monopolies"

"Increase Consumer Choice," Some Oppose
Authorities "Continue to Promote Financial Innovation and Regulatory Improvement"

[Asia Economy Reporter Kwangho Lee] Financial industry regulations on big tech (large information technology companies) and fintech (finance + technology) are not limited to South Korea. Global big tech companies in the US, China, Japan, and the European Union (EU) have also faced strong sanctions after entering the financial sector. In particular, China, combining internal political issues, has exerted tremendous pressure at the government level, creating a global consensus on the common challenge of preventing monopolies by big tech companies.

According to the financial sector on the 28th, China, once regarded as the most advanced country in the financial industry, has shifted to strict regulations on technology companies, including the fintech sector. As a result, in October last year, Alibaba's financial group, Ant Group, had its initial public offering (IPO) halted, causing the listing to fail. At that time, Chinese financial authorities went further by ordering Ant Group to transfer its loan credit information data to a state-owned company, effectively nationalizing it. The pressure that began with Alibaba later affected other big tech companies such as Tencent and Baidu.

The United States, a main pillar of the global economy, regulates fintech companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced after 2008. This legislation was enacted during the Barack Obama administration to address issues arising from the global financial crisis. It is considered the strongest financial regulation since the Glass-Steagall Act (which separated commercial and investment banking after the Great Depression). This is why big tech companies like Amazon hesitate to enter the financial business. In fact, Amazon, which operates simple payment, loan, and investment services, uses its own big data for loan screening, unlike traditional banks.

Policies that strengthen regulations on big tech themselves to discourage their entry into financial businesses are also being implemented. In June, the Joe Biden administration appointed Lina Khan, a Columbia University professor known as the "Amazon slayer," as chair of the Federal Trade Commission (FTC). Chair Khan is known for her 2017 paper "Amazon's Antitrust Paradox," advocating for active regulation of platform companies. The House Democrats and Republicans jointly introduced an antitrust package bill targeting big tech companies such as Amazon, Apple, Facebook, and Google.

The EU is also applying regulatory pressure on big tech companies. In December last year, the EU announced drafts of the Digital Markets Act (DMA) and Digital Services Act (DSA). These prohibit platform companies from favoring their own services through algorithms or deleting pre-installed applications on smartphones. Violations can result in fines of up to 10% of revenue or forced corporate breakups.

Japan is also tightening controls on big tech companies through the Digital Platform Transaction Transparency Act. Enacted in February, this law designated five companies?Amazon, Rakuten Group, Yahoo, Google, and Apple?as specific digital platform providers. It mandates prior notification of changes in transaction conditions and the establishment of systems for handling complaints. These companies must submit reports once a year.

Among economic experts, opinions differ between "efforts to prevent market collapse" and "enhancing consumer choice." Professor Sangbong Kim of Hansung University’s Department of Economics said, "The reason major countries are strengthening financial regulations on fintech companies is that the market could collapse," advising that "financial authorities should listen to diverse opinions and manage carefully." On the other hand, Professor Taeyoon Sung of Yonsei University’s Department of Economics emphasized, "Platforms must be viewed from the consumer’s perspective," adding, "If regulations are strengthened, innovation cannot occur, so consumers should be able to utilize and choose new services."

Jung Eun-bo, Governor of the Financial Supervisory Service, stated at the recently held "2021 Seoul International Finance Conference," "The Financial Supervisory Service will listen closely to global discussions on fair competition issues between financial companies and big tech," and "We will continue to promote financial innovation by financial companies and fintech firms and improve regulations accordingly."