Growing Pains in Platform Self-Regulation Discussions... The Key Issue is 'Commission Fees'

[Asia Economy Reporter Eunju Lee] As the Yoon Seok-yeol administration is encouraging discussions on self-regulation between platforms and tenant companies, the platform self-regulatory organization launched last year is facing difficulties in preparing regulatory proposals. The self-regulatory organization has agreed to introduce a standard tenant contract, but disagreements persist between tenant companies and platforms over detailed 'commission' clauses to be included in the contract and the introduction of a 'commission cap system.' Previously, the self-regulatory body held two subcommittee meetings but failed to reach a consensus.

According to related industries on the 31st, the private platform self-regulatory organization’s Gap-Eul Subcommittee will hold a plenary session to promote self-regulation. The main agenda is to prepare a consensus proposal on commission-related items and clauses within the standard tenant contract and terms and conditions agreed upon by participating companies. The self-regulatory organization previously held two subcommittee meetings attempting to resolve differences between tenant companies and platform firms regarding the insertion of commission clauses, but opinions remained divided. It is expected that the meeting will decide whether to proceed with subcommittee discussions on commissions and related matters.

Launched in August last year, the platform self-regulatory organization decided through meetings to introduce a standard tenant contract and is focusing on preparing detailed regulatory proposals centered on establishing a dispute resolution body. The platform self-regulatory organization is a meeting body composed of platform industry players such as Naver, Kakao, and Baedal Minjok, tenant companies including the Korea Federation of SMEs and the Korea Federation of Micro Enterprise Associations, and private experts. Related government ministries such as the Fair Trade Commission, Ministry of Science and ICT, and Ministry of Economy and Finance support the self-regulatory organization through the platform policy consultative body. The Fair Trade Commission plans to strive for self-regulation in the open market and delivery app sectors in the first quarter to improve contract practices that are difficult to regulate under current laws. Subsequently, it plans to expand self-regulation discussions to major industries such as accommodation apps and app markets.

The commission issue has become a sharp point of contention within the self-regulatory organization. Not only are there detailed differences of opinion regarding the commission clauses to be included in the standard tenant contract, but opinions also remain far apart over the introduction of a 'commission cap system.' Tenant companies have demanded the establishment of an annual commission ceiling that platform companies can raise. However, platform companies are known to strongly oppose the introduction of a commission cap system. There is a tentative agreement on establishing a dispute resolution body, and it is understood that there were no major disagreements among participating companies. Each platform operator runs its own dispute resolution system, and if issues arise that cannot be resolved through their own bodies, they are transferred to external committees such as the Korea Fair Trade Mediation Agency.

If the self-regulatory organization fails to prepare a consensus proposal, there is speculation that direct intervention by the Fair Trade Commission cannot be ruled out. After the launch of the Yoon Seok-yeol administration, the government shifted toward promoting platform self-regulation ahead of enacting the Online Platform Fairness Act, but if no effective consensus emerges from the self-regulatory organization, it will be difficult to avoid criticism for wasting time. A competition law expert said, "It is not easy to reach an agreement on the commission cap system," adding, "If a consensus proposal is not prepared through self-regulation, the possibility of legislative promotion through Fair Trade Commission intervention cannot be ruled out." In December last year, Han Ki-jung, chairman of the Fair Trade Commission, stated at a National Assembly audit by the National Assembly’s Political Affairs Committee, "If the (self-regulation) part does not function properly, I think we should proceed with discussions on legislation."