South Korea's government unleashed a wave of panic across the internet industry: the country's antitrust regulator said it would enact the strictest competition law outside Europe, curbing the influence of major technology companies.
The Korea Fair Trade Commission, backed by President Yoon Suk Yeol, said in December it planned to make a proposal inspired by the Digital Markets Act of 2022, the European Union's landmark law to rein in American tech giants. This bill also seemed to target South Korea's own internet conglomerates as much as it did 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 strengths in an online business to expand into new areas.
Then last week, the agency suddenly changed course. After a furious backlash from South Korean industry and consumer lobbies, and even the US government, the Fair Trading Commission said it would delay formally introducing the bill to solicit more opinions.
It is unclear when, or even if, the bill will advance. The moment has been complicated by the critical general elections in April. Mr. Yoon's conservative People Power Party seeks to wrest control of the legislature from the opposition Democratic Party of Korea, which has a significant majority. Polls have found public support for the regulation, and many of the sectors the bill claims 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 at home but with little global influence, which lobbied behind the scenes against the bill. They argued that the legislation was unnecessary and would ultimately benefit China's emerging competitors.
Regardless of its outcome, the episode signaled a growing appetite for tighter regulation of technology companies in Asia. He also underscored South Korea's concern, which now reflects the United States' own apprehension 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 courier 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 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 Corporation 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.
“One dominant platform here will be replaced by another in a matter of years, and this cycle will repeat itself,” Park said. “It's like prematurely preventing a big, strong student with the potential to become an athlete from training for fear of becoming a bully.”
He European Union Digital Markets Law, which will take effect next month, restricts the influence of so-called gatekeeper platforms that offer dominant technological services. Companies such as Apple, Amazon, Alphabet, Meta and Microsoft have announced changes to the way they operate to comply with the new rules.
But unlike South Korea, Europe does not have thriving local tech giants whose businesses could be challenged by regulation.
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 innovative services and rapid growth lies frequent abuse of power by a small number of platforms that monopolize the market.”
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 developments on how aggressively technology companies should be policed. Two years ago, he had campaigned on the principle of “self-regulation” and minimal government intervention.
South Korea's dependence on a network of interconnected services became clear when a fire at a facility housing Kakao's servers knocked out its services for more than a day in late 2022, disrupting communications across the country. At the time, Yoon said his administration would investigate whether Kakao was a monopoly and whether it needed to be regulated as “nationwide infrastructure.”
In November, Yoon called Kakao's ride-hailing app “tyranny” and “unethical” because it abused its monopoly status. She said Kakao Mobility Corporation, a majority-owned unit of Kakao, had gotten rid of its competitors by offering low prices, only to raise them again after becoming a monopoly. She called on the commission to propose measures to prevent abuses by dominant tech companies.
Kim Min-ho, a law professor at Sungkyunkwan University, said the change in Yoon's position was likely tied to the April election, when his party will seek to win over small business owners, taxi drivers and delivery workers. who have supported the opposition party's position on regulating big tech companies. Some smaller businesses have expressed support, according to the Korean Micro Business Federation, which in a poll found that 84 percent of respondents were in favor of the law.
In what is expected to be a close election, Kim said, Yoon “doesn't want to lose voters” because there are enough people who support tech regulation to change the outcome.
South Korean regulators also encountered protests from US officials. In a declarationThe U.S. Chamber of Commerce denounced the proposal as “deeply flawed.”
It added further strain to already strained economic ties 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 a pair of major South Korean industries: electric vehicles and semiconductors.
At a news conference this month, José W. Fernández, the State Department's undersecretary for economic growth, energy and the environment, said he hoped South Korea would consider U.S. concerns about the proposed bill, just as Washington I listened. to Seoul about its problems with the IRA and the CHIPS and Science Act.
South Korean antitrust officials said this week they would discuss the bill with the U.S. Chamber of Commerce.
Baek Woon Sub, president of the Korea Platform Sellers Organization, which represents about 1,500 Internet companies, said the rules would “leak down” and hurt small and medium-sized businesses. These smaller players are familiar with the rules and often work across multiple major platforms.
“Eventually, we will have to bear the brunt of the consequences,” said Baek, who runs a small e-commerce company, EG tech. “We will not survive.”
When asked if he thought the delay was a sign that the agency would ease the regulation or shelve it altogether, he was skeptical. He said he believed the regulator was regrouping and noted that he was listening to the industry's concerns.
“The Fair Trading Commission will not change,” he said. “They're going to come after us at the end of the day.”
