[Exclusive] 'Over 10 Million Monthly Users Classified as Market-Dominant Operators'... Platform Regulation Bill to Be Introduced

Representative Bae Jin-gyo of the Justice Party Proposes Ban on Private Brand Product Sales
Separate Supervision Division to Be Established in the Fair Trade Commission
"Could Stifle the Growth of Innovative Companies," Industry Concerns

Assemblyman Bae Jin-kyo of the Justice Party. / Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Kum Boryeong] The Fair Trade Commission is designating online platform companies with over 10 million monthly users as market-dominant businesses, and a bill restricting mergers and acquisitions as well as the sale of private brand (PB) products is emerging in the political sphere. The intention is to preemptively regulate giant platform operators spanning multiple sectors like Kakao and Naver, but concerns are being raised that this could once again stifle the growth of innovative companies, following the 'Tada Ban Law.'

According to political sources on the 1st, Justice Party lawmaker Bae Jin-kyo plans to propose a bill titled the "Basic Act on Monopoly Regulation and Fair Trade in the Online Platform Market" next week, which contains these provisions.

The bill centers on the Fair Trade Commission designating a platform intermediary business as a "market-dominant platform intermediary" if it has 10 million or more actual monthly users or more than 20,000 business users. The designation can only be revoked if the platform proves that it no longer meets the criteria for being market-dominant. This applies not only to Kakao and Naver but also to large operators like Baedal Minjok and Coupang. Bae's office stated, "Almost all platforms we commonly know are included."

Various regulations will apply to market-dominant platforms. The act of a platform intermediary selling its own private brand products or services on its platform is defined as a conflict of interest, and it is prohibited to provide preferential treatment to its own products or treat business users unfairly. The bill also includes establishing a Platform Market Supervision Bureau within the Fair Trade Commission to oversee online platforms. This bureau will be directly under the Fair Trade Commission chairman and will be required to submit activity reports to the National Assembly.

Bae's office explained the bill by saying, "There is a possibility that giant platforms will prioritize their own brands, so we want to put preventive measures in place," adding, "With global trends toward regulating online platforms such as the Amazon antitrust law, we believe it is necessary in Korea as well."

However, industry backlash is expected if the bill is proposed. An anonymous online platform industry official said, "If platform companies are banned from having their own private brands, oligopolistic companies might collude on prices instead," adding, "PB products are a means for both producers and consumers to enjoy affordable prices." He also claimed, "Even now, if a platform favors its own products, the Fair Trade Commission would impose sanctions."

The recent 'Kakao blackout incident' has had a direct impact on the imminent proposal of the giant online platform regulation bill. The blackout, which disrupted various services provided by Kakao, further stimulated the need for regulating giant platforms. Industry insiders criticize, "Solutions like data redundancy already exist, but the political sphere is approaching this from the wrong direction," and warn, "If the view becomes that online platforms should not grow, ultimately the ones who benefit will be foreign big tech companies."

"A giant platform regulation department should be established within the Fair Trade Commission"... Concerns over a 'Second Tada'

The industry judges that the "Basic Act on Monopoly Regulation and Fair Trade in the Online Platform Market," which lawmaker Bae plans to propose soon, is unrealistic starting from the designation of market-dominant platforms. The bill stipulates that a platform with "10 million or more actual monthly users or 20,000 or more business users" is defined as a market-dominant business, and that "the designation can only be revoked if the platform proves to the Fair Trade Commission that it no longer meets the criteria." This means that if a growing industry platform does not want to be bound by regulations, it must not intentionally expand its business scale.

"Is PB product a conflict of interest? It will harm consumer satisfaction"

The bill also defines the act of a market-dominant platform intermediary selling its own PB products or services alongside platform operation as a conflict of interest, which the industry sees as problematic. Currently, Coupang operates a fresh food PB called 'GomGom,' selling products like GomGom rice and GomGom Gwangcheon seaweed. According to the bill, Coupang should not sell or supply its own products on the platform to avoid harming other business users selling rice or seaweed. Bae's office said, "There are already platforms selling their own products, but this is to prevent issues in advance."

However, the industry dismisses this as a misunderstanding of the nature of PB products. An industry official said, "PB products are linked to revitalizing small and medium enterprises and help lower prices, thereby improving consumer satisfaction," and countered, "Without PB products, price collusion among oligopolistic companies would worsen." There are also concerns about fairness, considering that traditional retail giants like E-Mart and Lotte Mart sell PB products.

Additionally, the bill prohibits market-dominant platform intermediaries from treating business users unfairly, but this is already enforced. One official said, "If a platform favors its own products, it would have already faced sanctions from the Fair Trade Commission."

There is also an interpretation that online platform regulation is an extension of new industry regulations like the 'Tada Ban Law' and 'Zigbang Ban Law.' This raises concerns in the political sphere about "producing a second Tada." An industry insider pointed out, "As seen with Yahoo and Cyworld, it is uncertain how long dominant players can survive if left alone," and criticized, "Regulations only hinder market growth."

The proposal to establish an Online Platform Supervision Bureau within the Fair Trade Commission is also seen as unrealistic. Since regulations are already in place, adding new systems could reduce business autonomy and efficiency from the companies' perspective. There is an evaluation that this would only increase the Fair Trade Commission's authority. Another online platform official said, "Regarding the Online Platform Fairness Act, the Fair Trade Commission emphasizes self-regulation over legislation," and added, "From the Fair Trade Commission's standpoint, political regulatory moves are not disadvantageous."