[Insight & Opinion] Are Platforms the 'Public Enemy'?

[Asia Economy] After the Kakao service disruption caused by a data center fire, criticism of platforms has intensified. The president has ordered a review of the harms of monopolies, and both ruling and opposition parties are competing to impose regulations. This is expanding into platform regulations unrelated to measures to prevent recurrence of the incident. In fields such as law, real estate, and healthcare, where startups are actively entering, professional associations opposing platforms are reportedly uniting. Four organizations, including the Bar Association and the Medical Association, have formed an anti-platform council to expand their solidarity. The Bar Association ultimately disciplined lawyers who joined the legal platform ‘Lotoc’. At this point, one might even think that platforms have become the ‘public enemy’ of our society.

However, in our society and economy, platforms have overwhelmingly more positive functions than negative ones. Platforms connect numerous suppliers and consumers, or many users, creating new value. They resolve information asymmetry between suppliers and consumers, increase market transparency, reduce transaction costs, and enhance consumer welfare. When connecting many users, platforms tend to expand into new business models such as advertising rather than charging users directly. This eliminates opaque ‘lemon markets’ and increases convenience, encouraging usage.

Since platform competitiveness comes from the size of participants, concentration of market share naturally occurs. However, digital platforms continuously see new competitors emerge and substitutes are easily found. KakaoTalk became the ‘national messenger’ less than ten years ago, and during the recent disruption, competing services showed clear increases in their metrics. Had KakaoTalk’s service outage lasted about a month, most users would have switched to other services without hesitation. Even platforms that appear monopolistic must strive harder to satisfy users. This market has proven that anyone who fails to meet user demands will be eliminated.

Therefore, we are currently in the era of platform economy, and countries with many competitive platforms lead the global digital economy. Decentralized technologies, which emerged as alternatives to platforms, have yet to establish social trust. On the contrary, many areas still suffer from delayed ‘digitalization’ and fail to benefit from platforms’ utility. Fields such as healthcare, law, real estate, and transportation?where interest groups opposing platforms exist?are precisely the areas where citizens strongly desire innovation through platforms. These are sectors where startups can grow into unicorns and even aim to become global companies through digital transformation.

Of course, just because platforms contribute to innovation in our society does not mean they should be unconditionally supported. It is natural to consider and practice responsibility and social roles toward users and platform participants. However, concerns about platforms should not be exaggerated to the point of blocking innovation or leading to regulations that stifle the growth of new startups.

Recently, the Ministry of Land, Infrastructure and Transport announced measures to alleviate the late-night taxi crisis, with one key point being to ‘revitalize new platform transportation services along with past Tada and Uber models.’ While social conflicts led to banning innovation under the pretext of protecting the taxi industry, patchwork regulations failed to solve the taxi supply problem, bringing the situation back to square one. However, it is uncertain how many startups will dare to enter platform transportation services trusting government regulations that have already lost credibility. The role of the government and the National Assembly should be to consistently promote innovation and ensure that its benefits are enjoyed by more people. Our society needs more platforms.

Choi Sung-jin, CEO of Korea Startup Forum