Google Gets a Free Pass... Industry on Edge as Trade Concerns Override Regulatory Principles

Flexible for Foreign Firms, Strict for Domestic Ones: Industry Voices Concerns Over Reverse Discrimination
KFTC's Consent Decree with Google Sends Shockwaves Through Platform, Pharmaceutical, and Semiconductor Sectors

The Korea Fair Trade Commission (KFTC) has decided to accept Google's voluntary corrective measures without imposing a fine regarding allegations of "YouTube Music" tying practices. This decision is sparking controversy in the industry over regulatory fairness. Observers interpret the move as being influenced by concerns over trade friction, and worries are spreading, especially in industries sensitive to trade issues such as platforms, pharmaceuticals, and semiconductors.

On May 22, the KFTC announced that it would initiate a consent decree process for the investigation into Google's alleged forced transactions, which began in February two years ago. A consent decree is a system in which a company voluntarily submits corrective measures, and if the KFTC accepts them, the case is closed without determining whether a law has been violated.

The KFTC acknowledged that bundling YouTube Music, a music streaming service, with the ad-free YouTube Premium subscription could potentially infringe on consumer choice. However, instead of determining whether a legal violation occurred, the commission decided to close the case by accepting Google's voluntary corrective proposal.

Google announced it would launch a video-only subscription tier for YouTube Premium in Korea and establish a 30 billion won mutual growth fund to support local creators.

As the KFTC decided to conclude the case without a fine, the industry is interpreting this action as a signal of regulatory relaxation for foreign companies. Industry insiders note that this is the first case where trade friction has become a key variable in policy decisions, raising concerns that diplomatic considerations could take precedence over all regulatory matters in the future.

An industry official stated, "From now on, the possibility of trade friction with the United States or Europe could become the main criterion for policy decisions, rather than whether there is a legal violation. If foreign companies are subject to negotiation while domestic companies are regulated strictly according to principle, this is a clear case of reverse discrimination."

The government maintains that its position is to harmonize with global trade norms by adjusting its regulatory system. However, industry representatives and experts believe that while the process may appear voluntary, in substance it could be seen as a free pass. If the consent decree system is used as a means to avoid trade disputes, it could undermine trust in the entire regulatory framework.

Policy researchers are increasingly viewing Korea as a country that adjusts its regulations in line with trade considerations, rather than strictly enforcing them. They point out that if the standards of the regulatory system collapse, the legitimacy of law enforcement could also be damaged.

Kim Taehwang, a professor at Myongji University's Department of International Trade, said, "Issuing a consent decree on matters that could essentially constitute unfair practices appears to be a decision made with trade negotiation issues in mind. During tariff negotiations, imposing additional non-tariff measures that could arouse suspicion from the US government would have been burdensome."

Shin Wonkyu, an invited research fellow at the Korea Economic Research Institute, commented, "Tying sales is a business strategy targeting consumers and is not a major problem in a fair market environment, but with big tech companies like Google, there are significant concerns about market disruption. Guidelines are needed to encourage companies to take voluntary action."

He added, "To avoid giving the impression that the government is making decisions out of concern for trade friction, especially for regulations at the intersection of trade and industry, it is necessary to pursue policies that are fair and consistent while reflecting industrial realities."

There are now expectations that similar types of adjustments may be repeated in other areas entangled with trade issues, such as digital taxes, drug pricing systems, semiconductor supply chains, and data borders. If regulatory relaxation for foreign companies becomes institutionalized, there are concerns that Korea's independent regulatory framework could effectively lose its authority.