The South Korean government triggered a wave of panic in the Internet industry: the country’s antitrust authority announced that it would enact the toughest competition law outside of Europe and thus curb the influence of large technology companies.
The Korea Fair Trade Commission, backed by President Yoon Suk Yeol, said in December it planned to submit a proposal modeled on the Digital Markets Act 2022, the European Union’s landmark law aimed at reining in American tech giants. This bill also appeared to target South Korea’s own internet conglomerates as well as the world’s alphabets, apples and metas.
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 agency suddenly changed course. After an angry backlash from South Korean industry lobbyists and consumers and even the U.S. government, the Fair Trade Commission said it would delay formal introduction of the bill to gather more opinions.
It is not clear when or if the bill will be brought forward. The timing was complicated by a critical parliamentary election in April. Mr. Yoon’s conservative People Power Party is trying to wrest control of the legislature from the opposition Democratic Party of Korea, which has a clear majority. Polls have shown public support for the regulation, and many of the constituencies the bill is said to benefit, including smaller businesses and independent taxi drivers, have typically voted for the Democratic Party of Korea.
The delay was a temporary victory for South Korean internet companies – dominant domestically but with little global influence – that were lobbying against the bill behind the scenes. They had argued that the legislation was unnecessary and would ultimately benefit emerging competitors from China.
Whatever the outcome, the episode signaled a growing desire for stricter regulation of tech companies in Asia. It also underscored South Korea’s concerns, which now reflect America’s own concerns about the influence of its powerful tech giants.
In South Korea, Naver, not Google, is the preferred search engine and mapping service. Coupang has become the dominant player in e-commerce with efficient deliveries, and Kakao is a ubiquitous messaging service in the country, with a stronghold in ride-hailing.
In the past, it was American tech giants that accused the country’s regulators of overreach and argued that their protectionist policies created an unlevel playing field. But this time Korean companies led the protest.
Park Seong-ho, chairman of the Korea Internet Corporations Association, known as K-Internet, said the regulation would limit growth opportunities. The group’s members include Naver, Kakao, Coupang and the Korean units of Alphabet and Meta.
“A dominant platform here will be replaced by another in a few years and that cycle will repeat itself,” Mr Park said. “It’s like stopping a big, strong student with the potential to become an athlete from training early for fear he’ll become a bully.”
The European Union’s Digital Markets Act, which comes into force next month, limits the influence of so-called gatekeeper platforms that offer dominant technology services. Companies including Apple, Amazon, Alphabet, Meta and Microsoft have announced changes to the way they work to comply with the new rules.
But unlike South Korea, Europe has no thriving homegrown tech giants whose businesses could be challenged by regulations.
Han Ki-jeong, chairman of the Korea Fair Trade Commission, said in a written statement to The New York Times that the new regulations are necessary. While the country’s digital economy has flourished, he said, “behind the innovative services and rapid growth lies frequent abuse of power by a small number of market-monopolizing platforms.”
Naver, Kakao and Alphabet declined to comment on the possible regulation.
The proposal, known as the Platform Competition Promotion Act, reflects Mr. Yoon’s own evolution of how aggressively tech companies should be monitored. Two years ago he advocated the principle of “self-regulation” and minimal government intervention.
South Korea’s reliance on a web of interconnected services was highlighted when a fire at a facility housing Kakao’s servers in late 2022 crippled its services for more than a day and disrupted communications across the country. At the time, Mr. Yoon said his government would investigate whether cocoa was a monopoly and whether it needed to be regulated like a “nationwide infrastructure.”
In November, Mr. Yoon called Kakao’s ride-hailing app a “tyranny” and “unethical” for abusing its monopoly status. He said Kakao Mobility Corporation, a majority-owned subsidiary of Kakao, got rid of competition by offering low prices only to raise them again after becoming a monopoly. He called on the Commission to develop measures to prevent abuse 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 April election, in which his party would seek to win over small business owners, taxi drivers and delivery workers. He also supported the opposition party’s position, regulate large technology companies. Some smaller companies have signaled their support, according to the Korea Federation of Micro Enterprise, which found in a survey that 84 percent of respondents supported the law.
In the predicted close election, Mr. Kim said, Mr. Yoon “doesn’t want to lose any voters” because there are enough people who support technology regulation to influence the outcome.
South Korean regulators also faced protests from U.S. officials. In a statement, the U.S. Chamber of Commerce called the proposal “deeply flawed.”
This placed even greater strain on the already strained economic relations between the two countries. South Korean officials were unhappy with two laws enacted under the Biden administration, the Inflation Reduction Act and the CHIPS and Science Act, which they said threatened some of South Korea’s key industries: electric vehicles and semiconductors.
In a news conference this month, Jose W. Fernandez, the State Department’s undersecretary for economic growth, energy and the environment, said he hoped South Korea would heed the United States’ concerns about the bill, just as Washington listened to Seoul about its problems with the bill IRA and the CHIPS and Science Act.
South Korean antitrust regulators said this week they would discuss the bill with the U.S. Chamber of Commerce.
Baek Woon Sub, chairman of the Korea Platform Seller Organization, which represents about 1,500 internet companies, said the rules would “leak” and hurt small and medium-sized businesses. These smaller players are familiar with the rules and often operate across multiple major platforms.
“Ultimately, we will have to bear the brunt of the consequences,” said Mr. Baek, who runs a small e-commerce company, EG Tech. “We won’t survive.”
When asked whether he thought the delay was a sign that the agency would water down the regulation or put it on hold entirely, he expressed skepticism. He said he believes the regulator is regrouping and signaling it is listening to industry concerns.
“The Fair Trade Commission will not change,” he said. “At the end of the day, they’re going to hunt us down.”
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2024-02-17 00:23:23
www.nytimes.com
