South Korea’s government has unleashed a wave of panic across the internet industry: the country’s antitrust regulator said it would introduce the toughest competition law outside of Europe, curbing the influence of big tech companies.
The Korea Fair Trade Commission, backed by Chairman Yoon Suk Yeol, said in December it planned to submit a proposal under the Digital Markets Act of 2022, the European Union’s landmark law to rein in US tech giants. This bill also seemed to target South Korea’s internet conglomerates just as much as the Alphabets, Apples and Metas of the world.
The commission said the law would designate certain companies as dominant platforms and limit their ability to use strongholds in an online business to expand into new areas.
Then, last week, the organization suddenly reversed course. After a furious backlash from South Korean industry lobbyists and consumers, and even the US government, the Fair Trade Commission said it would delay the formal introduction of the bill to solicit more views.
It’s unclear when or even if the bill will move forward. The timetable is complicated by the crucial general election in April. Mr. Yun’s conservative People’s Power Party is trying to wrest control of the legislature from the opposition Democratic Party of Korea, which holds a significant majority. Polls have found public support for the regulation, and many of the constituencies it claims benefit from the bill, including smaller businesses and independent taxi drivers, have typically voted in favor of the Democratic Party of Korea.
The delay was a temporary victory for South Korea’s internet companies – dominant at home but with little global influence – which lobbied behind the scenes against the bill. They had argued that the legislation was unnecessary and would ultimately benefit emerging competitors from China.
Regardless of its outcome, the episode signaled a growing appetite for tighter regulation of tech companies in Asia. It also underscored South Korea’s concern that now mirrors America’s own concern about the influence of its powerful tech giants.
In South Korea, Naver, not Google, is the preferred search engine and map service. Coupang has emerged as the dominant player in e-commerce with efficient deliveries, and Kakao is a ubiquitous messaging service in the country with a stronghold on ride hailing.
In the past, it has been US tech giants that have accused the country’s regulators of overreaching, arguing that their protectionist policies created an uneven playing field. But this time, Korean companies led the protest.
Park Seong-ho, president of the Korea Internet Corporations Association, known as K-Internet, said the regulation would limit growth opportunities. Group members include Naver, Kakao, Coupang, and Korean units Alphabet and Meta.
“One dominant platform here will be replaced by another in a few years and this cycle will repeat itself,” Mr. Park said. “It’s like prematurely preventing a big, strong student with the potential to be an athlete from training out of fear that he’ll become a bully.”
The European Union’s digital markets law, which comes into force next month, curbs the influence of so-called gatekeeper platforms that offer mainstream technology services. Companies such as Apple, Amazon, Alphabet, Meta and Microsoft have announced changes to how they operate to comply with the new rules.
However, unlike South Korea, Europe does not have thriving domestic tech giants whose businesses could be challenged by legislation.
Han Ki-jeong, chairman of the Korea Fair Trade Commission, said in a written statement to The New York Times that the new regulations were necessary. While the country’s digital economy has flourished, he said, “behind the innovative services and rapid growth is frequent abuse of power by a small number of platforms that monopolize the market.”
Naver, Kakao and Alphabet declined to comment on the potential arrangement.
The proposal, known as the Promotion of Platform Competition Act, reflects Mr. Yoon’s own evolution of how aggressively to oversee technology companies. Two years ago, it had campaigned on the principle of “self-regulation” and minimal government intervention.
South Korea’s reliance on a web of interconnected services was made clear when a fire at a facility housing Kakao’s servers knocked its services offline for more than a day in late 2022, disrupting communication across the country. At the time, Mr. Yoon said his government would investigate whether Kakao was a monopoly and whether it should be regulated like “national infrastructure.”
In November, Mr. Yoon called ride-hailing app Kakao “tyranny” and “immoral” for abusing its monopoly status. He said Kakao Mobility Corporation, a majority unit of Kakao, had gotten rid of competitors by offering low prices, only to raise them again after becoming a monopoly. It asked the Commission to take measures to prevent abuses by dominant technology companies.
Kim Min-ho, a law professor at Sungkyunkwan University, said Mr. Yoon’s change in position was likely linked to the upcoming April election, when his party will try to win over small business owners, taxi drivers and workers. in delivery services. supported the opposition party’s position to regulate big tech companies. Some smaller businesses have expressed support, according to the Korea Federation of Micro Enterprise, which found in a survey that 84 percent of respondents were in favor of the act.
In the expected election, Mr Kim said Mr Yun “doesn’t want to lose voters” because there are enough people who support technology regulation to change the outcome.
Korean regulators also faced protests from US officials. In a statement, the US Chamber of Commerce denounced the proposal as “deeply flawed”.
It added more stress to the already strained economic ties between the two countries. South Korean officials were unhappy with two laws introduced under the Biden administration, the Inflation Reduction Act and the CHIPS and Science Act, which they said threatened some important South Korean industries: electric vehicles and semiconductors.
At a news briefing this month, Jose W. Fernandez, undersecretary of economic development, energy and environment at the State Department, said he hoped South Korea would address the United States’ concerns about the proposed bill, as Washington heard in Seoul on its problems with the IRA and the CHIPS and Science Act.
South Korean antitrust authorities said this week they would discuss the bill with the US Chamber of Commerce.
Baek Woon Sub, president of the Korea Platform Seller Organization, which represents about 1,500 Internet companies, said the rules would “trickle down” and hit small and medium-sized businesses. These smaller players are familiar with the rules and often work on several large platforms.
“Ultimately, we will have to bear the brunt of the consequences,” said Mr. Baek, who runs a small e-commerce company called EG Tech. “We will not survive.”
When asked if he thought the delay was a sign the agency would water down the regulation or ditch it altogether, he was skeptical. He said he believed the regulator was restructuring and signaling it was listening to industry concerns.
“The Fair Trading Commission will not change,” he said. “They’re going to hunt us down at the end of the day.”
