The legality of the fine imposed by the Fair Trade Commission on Naver for allegedly manipulating its shopping service algorithm by abusing its dominant market position will be re-examined in a second trial.
According to the legal community on the 15th, the Supreme Court's Second Division (Presiding Justice Oh Kyungmi) overturned the previous ruling against Naver in the lawsuit filed against the Fair Trade Commission's corrective order and fine payment order, and sent the case back to the Seoul High Court.
The Fair Trade Commission determined that between 2012 and 2020, Naver unfairly adjusted the Naver Shopping search algorithm on its Smart Store platform to disadvantage competitors, and imposed a fine of approximately 26.63 billion won along with a corrective order. The investigation found that from February to May 2012, Naver lowered the search rankings of competitors such as Gmarket, 11st, Auction, and Interpark on Naver Shopping. In July of the same year, Naver also ensured that products from its own Smart Store accounted for 15-20% of the items displayed on each page of Naver Shopping's search results.
When Naver filed a lawsuit challenging the Fair Trade Commission's decision, the Seoul High Court ruled against Naver in December 2022, stating, "Naver's actions could have the effect of restricting competition in the open market sector and constitute an abuse of its dominant market position." The court also noted, "Naver employees analyzed the impact of algorithm adjustments on the exposure frequency of Smart Store products and made future plans accordingly," adding, "There were also direct references to the need for Naver Shopping's support for the growth of Smart Store."
The Supreme Court stated that for an act to be deemed 'unjust' under the Monopoly Regulation and Fair Trade Act, which is a requirement for discriminatory conduct by a dominant market player, it must be proven that: ▲ there was an intention and purpose to maintain or strengthen a monopoly, and ▲ the conduct objectively raised concerns about anti-competitive effects.
Regarding the intention to restrict competition, the Supreme Court stated, "The plaintiff (Naver) researching the impact of algorithm adjustments or changes on search result exposure essentially constitutes normal business activity," and added, "Such efforts alone cannot be considered as evidence of an intention or purpose to restrict competition."
The Supreme Court further stated, "The previous court should have examined whether the increase in the plaintiff's market share or transaction volume resulted from the conduct in question, or whether it was a product of competitive market performance or the result of overall market expansion, and should have comprehensively considered the competitive landscape of the open market sector."
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