Fair Trade Commission Identifies 'Eradication of Digital Unfair Practices' as Top Priority Among Major Tasks This Year
Administrative Notice Issued for Revision of Review Guidelines Ahead of Enactment of On-Platform Fairness Act and Amendment of Electronic Commerce Act
Market Definition Considering Characteristics of Multi-Sided Markets
Dominance Assessment of Free Service Platforms Based on Number of Users, etc.
Key Unfair Practices Regulated Include 'Multi-Homing Restrictions, Most-Favored-Nation Clauses, Self-Preferencing, Tying'
[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has identified 'eradication of unfair practices in the digital sector' as its foremost priority among key tasks this year, pledging to strengthen monitoring and institutionalize related regulations such as the enactment of the 'Online Platform Fairness Act.' In particular, the FTC pointed out major unfair practices by online platforms, including 'multi-homing restrictions, most-favored-nation (MFN) clauses, self-preferencing, and tying,' signaling strict law enforcement against these behaviors.
Recently, the FTC announced its '2022 Major Work Plan,' highlighting key core initiatives for this year: ▲ promoting competition and enhancing consumer rights in the digital economy ▲ fostering an inclusive trading environment between large and small-to-medium enterprises ▲ establishing sound governance and transaction order within large business groups.
As part of institutionalizing basic norms for a fair digital economy, the FTC plans to actively push for the enactment of the On-Platform Fairness Act, which has been stalled in the National Assembly for over a year. Simultaneously, it has prepared a draft of the 'Review Guidelines on Abuse of Market Dominance and Unfair Trade Practices by Online Platform Operators,' which is currently under administrative notice until the 26th.
The review guidelines do not introduce new regulations but rather specify the criteria for examining anti-competitive conduct under the current Fair Trade Act, based on accumulated law enforcement cases in the online platform sector. These guidelines will be applied when assessing whether the conduct of online platform operators constitutes abuse of market dominance or unfair trade practices under the existing Fair Trade Act.
When defining the relevant market for determining illegality, the guidelines require consideration of the multi-sided nature of online platforms. In cases where strong network effects exist?where the demand of one group of users affects the demand of others?and where the platform directly intermediates transactions, and where perceptions of substitutability among user groups align, the multi-sided market is likely to be defined as a single market. Conversely, if competitive dynamics differ across sides, the market will be segmented accordingly.
The guidelines cite examples such as 'multi-homing restrictions,' which directly or indirectly hinder users of their own online platform from using competing platforms, and demands for 'most-favored-nation (MFN) clauses,' which require transaction terms on their platform to be equal or more favorable than those on other distribution channels, as practices that reinforce monopoly power in the platform market. Additionally, 'self-preferencing,' where a platform favors its own goods or services over competitors’ on its platform, and 'tying,' which forces users to transact with other goods or services alongside the platform service, are seen as leveraging platform monopoly power to monopolize related markets, thereby restricting competition.
An FTC official stated, "These review guidelines aim to enhance predictability in law enforcement by presenting market definition and dominance assessment criteria that consider the characteristics of the online platform sector. By illustrating typical types of anti-competitive conduct with concrete examples, they are expected to contribute to preventing future violations of the law."
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