Ruling Party and Government: "Ban on Platform Self-Preferencing... Amend Large-Scale Retail Act to Prevent Unfairness"

Preventing the 2nd Timef Incident and Guaranteeing Market Entry for New Platforms
Online Brokerage Transaction Platforms to Be Obliged to Settle Payments Within a Certain Period

A plan is being promoted to prohibit preferential treatment of in-house related products and services and tying sales on large-scale e-commerce platforms, and to include e-commerce companies above a certain scale in the regulation of large-scale distribution businesses. This is to prevent the recurrence of the Tmon and Wemakeprice (Timep) incident and to guarantee market entry for emerging platforms.

Kim Sang-hoon, the Policy Committee Chair of the People Power Party, announced on the 9th at the National Assembly that the ruling party and government reached this consensus at a party-government consultation meeting held under the theme of "Promoting Fair Competition on Platforms and Legislative Directions to Prevent Recurrence of the Timep Incident."

[Image source=Yonhap News]

First, by amending the Fair Trade Act, they plan to block anti-competitive acts against competing businesses in the platform market and restore competitive order by prohibiting self-preferencing, tying sales, multi-homing, and demands for most-favored-nation treatment. Multi-homing refers to the phenomenon where users switch platforms or use multiple platforms. While criminal penalties will not be imposed for prohibited acts, fines will be increased and temporary suspension orders introduced to prevent latecomer platforms from being pushed out of the market.

Additionally, to prevent platform companies from engaging in unfair acts against relatively weaker businesses, the Large-Scale Distribution Business Act will be amended to designate online intermediary transaction platforms above a certain scale as large-scale distributors. Two criteria are being discussed: intermediary transaction revenue of 10 billion KRW or more, or intermediary transaction amount of 100 billion KRW or more; and intermediary transaction revenue of 100 billion KRW or more, or intermediary transaction amount of 1 trillion KRW or more. Regarding this, Nam Dong-il, Secretary General of the Fair Trade Commission, stated, "Major large-scale transaction platforms are expected to be included."

To prevent recurrence of incidents such as the non-payment of settlement funds in the Timep case, discussions between the ruling party and government decided to impose obligations on online intermediary transaction platforms to settle payments within a certain period and to regulate the separate management of a certain percentage of sales proceeds. Proposed settlement deadlines include 10 or 20 days from the purchase confirmation date, or within 30 days from the sales closing date. Separate management ratios for sales proceeds have also been proposed at 100% and 40%.

The Fair Trade Commission plans to finalize the amendment bill after gathering opinions through public hearings this month on scale criteria, settlement deadlines, and separate management ratios. Han Ki-jung, Chairman of the Fair Trade Commission, said, "The acceleration of the digital economy and the emergence of platform services have increased consumer choice and provided new business opportunities for small merchants, greatly contributing to our economic growth," but he pointed out, "However, the platform market has revealed unexpected side effects along with the benefits of innovation."

He continued, "Monopolized platforms have blocked the emergence of competing platforms through unfair practices, and as seen in the Timep incident, sufficient measures to protect tenant businesses and consumers have not been adequately established," explaining the background of the discussion: "The Fair Trade Commission has devised policy alternatives to quickly establish competitive order and strengthen protection for tenant businesses on intermediary platforms."