"Platform Act to Restrict Startup Growth... Reasons for Investment Also Disappear"

Startup Industry Voices Opposition Over Concerns of Ecosystem Contraction

The startup industry has clearly voiced opposition to the enactment of the 'Platform Fair Competition Promotion Act (Platform Act)' being promoted by the Fair Trade Commission. They argue that it imposes limits on startup growth and could lead to a decrease in investment.

On the 31st, Startup Alliance and the Digital Economy Forum jointly held a seminar titled 'Platform Regulatory Bills and the Future of the Digital Economy.'

Choi Seong-jin, CEO of Korea Startup Forum, stated, "Startups, investors, and the entire ecosystem oppose regulations on large platforms," emphasizing, "This law aims to impose strong regulations by pre-designation or by limiting growth, sending a message to the market that managing a company becomes difficult once it grows beyond a certain scale, which will eliminate reasons to actively invest in platform companies."

He added, "Most startups grow by receiving investments and aim for an exit," and noted, "In Korea, the biggest acquirers of startups are Naver and Kakao, but there may be changes as acquiring startups could lead to criticism of overexpansion like an octopus's tentacles."

Jeon Seong-min, professor of Business Administration at Gachon University, also expressed concerns about the contraction of the startup ecosystem. Professor Jeon said, "Many startups plan to be acquired by platform companies like Naver or Kakao," but "if these plans are blocked, the impact on startups will inevitably be significant."

Concerns were also raised in academia regarding the Fair Trade Commission's Platform Act. Kim Hyun-kyung, professor at the Graduate School of IT Policy at Seoul National University of Science and Technology, said, "Looking at regulatory policies over the past 6 to 7 years, there have been inconsistent approaches, such as strong regulation followed by voluntary regulation," adding, "While preparing such an important law, empirical research or scientific evidence was lacking; market empirical research, status analysis, expert consultations, and stakeholder consensus were almost omitted."

She also emphasized that large platform operators having dominant influence in the market does not necessarily lead to a winner-takes-all structure. Professor Kim said, "Latecomers can also capture market share, and as technological innovation and user demand evolve, users tend to move to innovative service providers rather than being locked in to dominant operators," adding, "It is assumed that a firm and sustained dominant position is currently held or will be held in the future, but this is very unclear."

Kim Min-ho, professor at Sungkyunkwan University Law School, stated, "If platforms are regulated, it does not necessarily mean that the welfare of users on the other side increases or that small business owners directly benefit; such a coin's two sides relationship does not appear," and warned, "Pursuing legislation based on such assumptions is very risky, and it is necessary to conduct analytical and empirical research and field surveys first, without appealing to populism with cold rationality."

The Fair Trade Commission has been promoting the enactment of the Platform Act since December last year. The Platform Act includes provisions to pre-designate platform companies with monopolistic status as dominant operators and strengthen monitoring by prohibiting four major unfair practices. The government’s proposal is expected to be released next month, with analyses suggesting that four companies?Apple and Google from the U.S., and Naver and Kakao from Korea?will be subject to regulation.