'Preferential Treatment for Own Products and Bundling' Review Guidelines Included... Fair Trade Commission Begins Full-Scale Big Tech Regulation

[Asia Economy Reporter Eunju Lee] Massive online big tech platforms like 'Nekarakubae' are expected to become the focus of intensive monitoring by the Korea Fair Trade Commission (KFTC). On the 12th, the KFTC announced the implementation of the 'Guidelines for Reviewing Abuse of Market Dominance by Online Platform Operators.' Reflecting concerns from small and medium-sized startup platforms, the guidelines will not include sections on 'unfair practices.'

The Korea Fair Trade Commission announced that the 'Guidelines for Reviewing Abuse of Market Dominance by Online Platform Operators' were approved at the plenary meeting on the 11th and will be enforced starting from the 12th. The guidelines concretize the review criteria for abuse of monopoly power as stipulated in the current Fair Trade Act, based on accumulated law enforcement cases in the online platform sector. The guidelines were developed through ten joint public-private task force meetings, expert research projects, and industry consultations.

According to the guidelines, it will become easier to classify big tech platform companies like 'Nekarakubae' as 'market-dominant operators.' The guidelines present criteria for determining a platform company's 'market-dominant operator' status, including 'cross-network effects (whether market entry barriers exist),' 'gatekeeper influence,' data collection, possession, and utilization capabilities, 'possibility of new service emergence,' and 'market share calculation criteria beyond sales revenue.'

Under the current Fair Trade Act, even if a platform company abuses its market-dominant position, proving that it is a market-dominant operator in that market has been challenging. Article 4 of the Fair Trade Act presumes a company to be market-dominant if a single company holds more than 50% market share or if three or fewer companies hold more than 75% market share. However, platform companies often adopt free policies or strategic loss-making policies during early market entry. Accordingly, for cases like mobile operating systems (OS) with no sales revenue, market share is calculated based on the number of mobile devices equipped with the system, expanding the criteria for evaluating market dominance.

The guidelines also specify major types of conduct that raise competition concerns in the platform sector. The guidelines define 'multi-homing restrictions' (hindering users of their own online platform from using competing platforms), 'most-favored-nation demands' (requiring transaction terms on their platform to be equal or more favorable than other distribution channels), 'self-preferencing' (directly or indirectly favoring their own products or services over competitors’ on their platform), and 'tying' (forcing transactions of other products or services together with the online platform service) as competition-restricting acts by market-dominant operators. Additionally, when defining the market, the multi-sided nature of online platforms is considered, and even free services can be included in the relevant market if transactions occur.

The section on 'unfair practices,' excluding 'abuse of market dominance by market-dominant operators,' has been omitted from the guidelines. The KFTC explained that this reflects concerns from small and medium-sized platform companies and startups. Since the guidelines were planned amid rising social issues regarding monopoly problems of major big tech companies, the KFTC judged that excessively broad application could unnecessarily hinder the growth of small startup platforms. Yuseong Wook, Director of the Market Surveillance Bureau, explained, “Since the guidelines clearly state in the general provisions that unfair trade practices will be applied, (even if a company is not a big tech firm) acts abusing bargaining position can still be regulated.”