[How Big Tech Regulation]③ "Kakao Outage Damage, Result of Monopoly"... Insufficient Discussion on Promoting Competition

Last October, the 'KakaoTalk outage incident' occurred, sparking widespread awareness of the need to curb monopolies where specific platforms dominate the market. As discussions on monopoly regulation heated up, some also argued for guaranteeing data portability and interoperability. The idea was that if users could easily switch to other messengers with their message history and other data, the damage caused by the Kakao outage would not have spread so extensively. Competition authorities in major countries are also discussing the introduction of regulations to promote competition among big tech platforms. However, such discussions have been insufficient in South Korea so far.

[Image source=Yonhap News]

One factor deepening the monopoly and dominance of platform companies is the 'high switching cost.' For example, users can upload various data, including photos and personal information, to Facebook, but it is difficult to fully transfer that data to another SNS (social networking service). To 'switch' to another social media, users must re-upload their personal information to the newly created platform from scratch. This means the 'switching cost' that users must bear to move their generated data to another platform is considerable. Switching costs make users hesitant to engage in transactions with other platforms (multi-homing), which ultimately increases the platform's 'lock-in effect.' This leads to the intensification of a specific platform's monopoly power.

'Lower Switching Costs'...Active Discussions on Competition-Promoting Regulations Overseas

Not only the domestic messenger market, where 'KakaoTalk' almost monopolizes, but also the domestic cloud market is considered a market with high switching costs. According to a Fair Trade Commission (FTC) survey, when customers try to move cloud services, they face significant technical constraints such as having to reset already established work processes (programming languages, APIs, etc.). There are also considerable constraints due to the costs and time required to smoothly transfer large amounts of accumulated data in existing infrastructure to competitors. The FTC survey found that only 14% of customers had actually experienced switching cloud providers. Additionally, 68% of customers had no plans to adopt multi-cloud solutions. Over the past three years, Amazon's market share in the domestic cloud market has been overwhelmingly high, ranging from 62% to 78%.

Competition authorities in the United States, Europe, and other regions have pushed for regulatory legislation to promote market competition by ensuring data portability and interoperability. The intent is to lower big tech platforms' switching costs by guaranteeing that users can freely transfer their data to other services with their consent. The European Union (EU) is close to implementing related laws. The Digital Markets Act (DMA), which imposes data portability obligations on gatekeeper platform operators, came into effect in May this year, and the process of designating gatekeepers subject to regulation has begun.

The legislation defines acts by companies designated as gatekeeper platforms that restrict users' switching to other services as a type of unfair practice. It also imposes an obligation on platforms to provide means for consumers to effectively transfer their data. The law mandates the 'free portability of materials created or provided by merchants or end-users.' Furthermore, gatekeeper search engine platforms have a strong obligation to ensure that users' search-related data (clicks, views, rankings, etc.) are accessible to third-party search engine platforms on fair, reasonable, and non-discriminatory terms. In Germany, an amendment to the Act Against Restraints of Competition (GWB), which prohibits designated platforms from refusing or making data interoperability difficult to restrict competition, came into effect in January 2021.

In the United States, among five antitrust bills introduced in the House of Representatives last June, the 'Data Mobility and Interoperability Act' (ACCESS Act, Augmenting Compatibility and Competition by Enabling Service Switching Act) imposed obligations on designated platforms to ensure data portability and interoperability. Violations could be considered 'unfair methods of competition' prohibited under Section 5 of the Federal Trade Commission (FTC) Act, allowing for civil penalties. The designated platforms are also required to maintain interfaces accessible to third parties to promote interoperability with potential competitors. Any changes to the interface require FTC approval. However, these two bills did not pass the House by December last year.

Minister Lee Jong-ho of the Ministry of Science and ICT and Chairman Han Sang-hyuk of the Korea Communications Commission are attending the full meeting of the Science, Technology, Information and Broadcasting Committee held at the National Assembly in Yeouido, Seoul on the 9th. Photo by Kim Hyun-min kimhyun81@

Competition-Promoting Discussions Lag in South Korea... Fair Trade Commission Says "We Have Just Started Considering"

In contrast, in South Korea, discussions on promoting competition by reducing switching costs for big tech platforms have not yet fully begun. The government has initially delegated serious discussions on this issue to a self-regulatory body to consider it as one of the self-regulation proposals. Since June last year, the 'Data and AI (Artificial Intelligence) Subcommittee' within the self-regulatory body has been discussing ways to provide transparency in online platforms' search and recommendation services and improve data accessibility for merchants, considering industry-specific characteristics. This subcommittee is led by the Ministry of Science and ICT, not the Fair Trade Commission.

The Fair Trade Commission is still in the early stages of forming awareness about promoting data-related regulations. In December last year, while analyzing the competitive situation in the cloud market, the FTC pointed out that "the habitual incompatibility between technologies and practices that make data transfer difficult in the large cloud platform market restrict market competition." It announced plans to establish monopoly policies to enhance competitive pressure. An FTC official said, "We plan to focus on promoting interoperability to devise effective measures for improving competitive pressure in the cloud sector," adding, "We have just started considering regulations that can promote competition within the platform market."

Discussions on platform regulations to promote competition are also insufficient in the National Assembly. The Telecommunications Business Act amendment proposed in September 2021 by Representative Byeon Jae-il of the Democratic Party and the bill proposed by Representative Bae Jin-gyo of the Justice Party include provisions to guarantee data portability and interoperability. Byeon Jae-il's bill requires telecommunications service providers meeting certain criteria such as user numbers and revenue to share information upon request from users or businesses using the platform to reduce data gaps between businesses.

Bae Jin-gyo's bill mandates that market-dominant platform companies must transfer and provide essential transaction customer information to merchants and maintain user interfaces accessible to third parties. The intent is to promote interoperability. Kwon Young-kwan, senior research fellow at the Fair Trade Research Center, pointed out in a report titled 'Review of Various Regulatory Perspectives for Seeking Reasonable Regulation Directions for Online Platforms' that "except for measures to improve data accessibility for digital platform users, there has been virtually no discussion in South Korea on ways to correct market failures caused by excessive concentration in the digital platform market."