Professor Hong, could you please tell us a bit more about your background and how you got interested in digital competition regulation?
In South Korea, I have unique combined experience as a court judge and as an antitrust specialist at a major law firm, conducting numerous research projects that connect theory and practice. I have a particular interest in competition law, consumer law, and economic regulation related to the digital economy. In addition to academic research, I have provided policy advice to Korea’s competition authority, sector-specific regulatory authority for media and telecommunications, and policy-research institutions.
And what have you observed? What is the Korea Fair Trade Commission (KFTC) currently trying to achieve?
The KFTC is clearly focusing on regulating online platforms more actively. It keeps trying to introduce new regulations, following a trend from the EU, which has taken the initiative of regulating online platforms (the clearest example is the Digital Markets Act). The KFTC has also launched several investigations of online platforms in South Korea, such as three self-preferencing cases against Naver; a self-preferencing case against Kakao Mobility; and two cases against Google for forcing smartphone makers to install its Android operating system on their phones and banning the use of modified Android OS versions on their devices, and for preventing mobile-game developers from releasing games via competing Android app-store providers.
Please give us a bit of background on the South Korean online-platform market.
In South Korea, Coupang takes the place of Amazon (Amazon is not present, but Coupang had 24.5% market share as of 2022, whereas the second-biggest competitor, Naver, had 23.3% market share). Naver is the equivalent of Google in the online-search service market. Google exists in South Korea, but it only had a 30% market share, compared to Naver’s 60% as of 2023. Kakao is the South Korean equivalent of Whatsapp (which is present in South Korea, but has only a marginal market share). It had about 94% market share as of 2023. Apple and Meta are active in South Korea, too.
Could you tell us a bit more about the position of Apple compared to South Korean firms like Samsung? Also, how big are Instagram and Facebook in your country?
In South Korea, Apple is perceived as a company competing with Samsung in the smartphone market and with Google in the app-store market. As of 2023, Samsung had 64% market share in the smartphone market and Apple had 35%, while in the app-store market—which is influenced by the smartphone market—Google’s share is dominant. In Korea, as of 2023, Meta held about 60% market share in the social-networking service (SNS) market, with recent trends showing a decrease in Facebook users and an increase in Instagram users.
That’s interesting. Why do you think Google hasn’t been able to penetrate the South Korean market to the same extent as in other countries, where it often has a market share in excess of 90%?
I believe that Naver, the leading domestic search-service provider, has gained a competitive advantage over Google and enjoys network effects by combining its unique search environment and differentiated service development with the advantage of being a native-language search service. When local-language content was scarce, Naver secured a large amount of native-language content on its portal, creating a search environment where users circulate within the portal. They also developed differentiated services, such as real-time popular search terms and related search-term services.
Are South Korea’s family-controlled business conglomerates known as ‘chaebols’ targeted by any of the new regulations?
Chaebols are subject to unique regulation under South Korean competition law. There is a “large business group regulation”—part of the Monopoly Regulation and Fair Trade Act—that targets companies by size (i.e., by total assets or turnover) and does cover chaebols. For example, cross-ownership of securities among companies affiliated to the same large business group is not allowed. Most of this regulation is related to investment restrictions inside the same large business group, and they are subject to strong disclosure requirements.
But it should be noted that what these regulations are trying to target is different from “market power” as it is understood in competition law. It’s a different concept of economic power. It’s power across markets. For example, Samsung, LG, and Hyundai Motors have various different businesses across South Korea. In fact, any business group that meets the size criterion (about $8 billion in total asset or turnover) will be subject to this regulation, and both Naver and Coupang meet this criterion.
The proposed Platform Competition Promotion Act also sought to impose special requirements on companies based on their size—i.e., turnover, number of users, etc. Do you see any parallels between chaebol regulation and the Platform Competition Promotion Act?
Chaebol regulations and the Platform Competition Promotion Act are similar in that they designate certain companies or business groups ex ante and apply special regulations only to those designated entities. There are, however, differences between the two. Chaebol regulations designate companies based solely on quantitative criteria such as total asset size or sales revenue, regardless of the industry, and once designated, this cannot be reversed (unless the company’s size decreases). In contrast, the ex-ante designation system of the Platform Competition Promotion Act applies only to companies in the online-platform sector, has more diverse designation criteria, and allows for the reversal of designation.
Do you think that the Platform Competition Promotion Act was targeting market power in a way similar to competition law, or something else? You previously mentioned that chaebol regulation addresses a ‘different concept of economic power.’ What did the Platform Competition Promotion Act seek to address?
Chaebol regulations aim to prevent excessive concentration of economic power across the entire economy, beyond individual markets. Their main purpose is to prevent distortions in the ownership and control of large business groups as a whole, which is distinct from the goal of protecting competition under competition law. In contrast, the Platform Competition Promotion Act aims to promote competition in the online-platform sector. While this is related to the goal of protecting competition in competition law, it does not require market definition for individual markets in the online-platform sector. Instead, it is premised on the perception that there is a lack of market contestability in the online-platform sector, thus expanding the purpose of competition law.
Can you briefly explain what you mean by ‘expanding the purpose of competition law’?
Traditional competition law aims to protect competition, and therefore has legal means to address certain forms of anti-competitive behavior ex post to restore competition. Korean competition law is similar in this regard. The Platform Competition Promotion Act, however, goes further by seeking to establish legal mechanisms to designate large online-platform operators meeting certain criteria ex ante—to monitor their behavior, promote competition, and even to shape it. This is what I describe as expanding the purpose of competition law, in that it can have the objective of promoting competition beyond merely protecting it.
Do chaebols get any benefits for being chaebols?
No, just stricter regulations.
What ex-ante initiatives have the KFTC put into place or proposed? Can you give us an overview of what’s been going on over the last five years?
In 2020, the KFTC unveiled plans to introduce the Online Platform Transaction Fairness Act (note that this is different from the Platform Competition Promotion Act). It faced strong opposition, however, from both scholars and industry. There were two main reasons for this. The first is that the South Korean environment is different from the EU. South Korea has very strong and competitive domestic companies. Many are worried that such initiatives would hamstring them and disadvantage them compared to U.S. companies like Apple and Google. The second reason is the different regulatory environment. South Korea already has many complex regulatory systems in place. They don’t need any more. For example, the government required companies to expose the identity of people leaving reviews. Such regulations only covered Korean companies, so users transferred to YouTube, thus weakening Korean companies. The fear is that overregulation was making South Korea lose its competitiveness.
For the next three years (2020-2023), there were many suggestions for new laws from the government and the National Assembly. But the biggest challenge came from the Korean Communications Commission (KCC), which is like the U.S. Federal Communications Commission (FCC). The KCC thought that regulation of online platforms was an extension of telecommunications regulation. So, they thought they should be in charge of it. They suggested new legislation, very similar to the KFTC’s Online Platform Transaction Fairness Act. Two kinds of regulation were proposed that were sort of overlapping. The president’s office tried to mediate between the two. Ultimately, time passed, and nothing happened. Then the last government’s period ended, so all that legislation died down.
National Assembly member Jung-min Hong and others proposed special rules for app stores. It’s actually only one provision to the amended Telecommunications Business Act, which was enacted in 2021. It targets prohibiting businesses from hindering the introduction of alternative payments systems. In reality, as many as seven members of the National Assembly proposed similar bills, which were integrated to form the aforementioned amendment.
The ‘palace wars’ between the agencies seem to have played a big part in sealing the fate of the new competition rules.
Yes. The KFTC has the ambition of controlling platforms and displacing the information-technology regulator and the telephone regulator. The way to achieve this, they think, is through ex-ante regulation or a competition-law reform with similar effects. A lot of what’s going on can be understood by looking at the rivalry among agencies (KFTC and sector-specific regulators) and their conflicting goals, and by looking at agencies’ ambitions to grow and empire-build.
And yet, the KFTC recently seems to have abandoned ex-ante regulation and has instead proposed competition-law reform. Why is that?
The KFTC has been keeping an eye on the EU. It tried to introduce ex-ante regulation similar to the DMA, but that plan lost steam when the policies of the incoming government changed. The previous government supported regulation, but this one is taking a different direction. It favors self-regulation. In addition, strong digital regulation is seen as the opposition’s initiative, so not something that the governing party is necessarily keen to endorse.
The current government has instead proposed reform of the Competition Act. What are the main differences and similarities between the ex-ante regime and the proposed reform to the competition law?
Competition law is going to have a case-by-case approach. They will try to ascertain whether there is dominance first. The Fair Trade Act amendment, however—introduced by National Assembly member Min-kuk Kang and fellow ruling party members on Oct. 28, and which incorporates the government’s recommendations—includes provisions that contradict fundamental competition-law principles.
There are new presumptions that will be triggered when a company surpasses certain size thresholds. These consist of only quantitative factors, similar to ex-ante regulation in the EU. The quantitative values relate to turnover, market share, and user base. The company would also have to be active in online-platform services (again, similar to core platform services in the DMA—with some exceptions, including cloud-computing services). If these conditions are met, certain conduct is presumed to be illegal, though a rebuttal is possible. Currently, four types of conduct would be presumed illegal: self-preferencing, tying and bundling, restricting multi-homing, and most-favored-nation (MFN) clauses.
Is it clear how a company could rebut these presumptions?
The approach taken presumes illegality once the facts of the conduct are established. It should, however, be possible for businesses to rebut this presumption by asserting and proving contrary circumstances. While an efficiency defense is allowed, it is only permitted under very strict conditions, making it highly unlikely to be accepted. Furthermore, considering KFTC’s past practices, overturning the presumption of illegality would be extremely difficult.
How certain is it that this competition-law reform will be enacted?
I’m not sure. The government has changed the direction of their regulation initiative.
What do you think of such initiatives? I’m referring to both ex-ante regulation and competition-law reforms to include presumptions against certain companies based on services and size. You wrote an article on the topic recently with Daniel Sokol.
Yes, I said that regulation could strangle innovation. Even though the government changed from ex-ante to ex-post evaluation of conduct, the key point is who has the burden of proof: the KFTC or the company? In this sense, the most important point remains unchanged. With the reform, the burden is still with the company. Once the burden shifts to the company to prove its innocence, this imposes an important cost of doing business in South Korea. If companies have to readjust their way of doing business, they will become fearful and less willing to be adventurous and innovative. This weakens innovation.
How could the reform of the Competition Act affect South Korea’s competitiveness?
I have a sense of how it could play out. Naver, Kakao, and Coupang are very active in expanding their businesses. In particular, Naver has been doing a lot of investment in AI development. They need money and financing. Advertising is their core business and what generates revenue and allows them to innovate and expand. But regulation and competition reform target their core business and therefore could undermine their expansion and growth. How can they innovate if their main source of income is undercut? It’s going to become very difficult.
This would ultimately also affect consumers. It is therefore not surprising that many industries have raised concerns about the new regulations. In addition, most people are very happy for the businesses of online platforms, except some frivolous behaviors that can be easily remedied through the current laws.
Could you give an example of the sort of conduct that could be easily addressed using existing law?
Korean competition and consumer laws provide many legal tools that allow the KFTC to effectively regulate corporate behavior without having to prove the impact on competition. Therefore, if a company changes trading conditions unfavorably for its trading partners or consumers, or introduces new trading practices to that effect, the KFTC can challenge these actions using current legal tools. An example of this occurred in 2020 when Yogiyo, which was then the second-largest food-delivery app company in Korea. Unlike the market leader Baemin, Yogiyo imposed transaction fees, while prohibiting restaurant owners from setting their own prices lower than the delivery prices. The KFTC regulated this practice, deeming it contrary to normal trading practices.
What is behind the political sense of urgency for reform?
We have to understand that competition and fairness are two different issues. Even though competition is important, fairness among business parties is very difficult to achieve. Many of these businesses depend on big online platforms. This then creates much ground for political involvement. Politicians don’t seem to worry about the whole economy. They worry about votes and their political agenda.
As you know, corporate actions have various impacts on other involved businesses and consumers, and their effects on market competition and consumer welfare are complex. Therefore, evidence-based balancing of values and interests is necessary on a case-by-case basis. Politicians, however, often try to lead popular agendas to enhance their reputation and act to gain support from political forces that vote for them. As a result, more often than not, they ignore the need for such balancing and make legislative decisions that favor specific political groups.
Which political group do you think is being favored with the reform of the Competition Act?
I think that the primary political group expecting to gain political support through strengthened regulation of online platforms via legislation is the opposition Democratic Party (DP), which holds the majority in the National Assembly. The DP is perceived as center-left in its political orientation and has a support base of small and medium-sized businesses that depend on online-platform companies. If, however, the reform of competition law retreats from the strong legislation initially proposed by the opposition party and only slightly modifies the existing competition law, it could be an opportunity for the ruling People Power Party (PPP) to regain support from not only online-platform companies, but also innovative startups and consumers.
Is it correct to say that one fear the government has is that overly stringent regulation might put South Korean companies at a disadvantage, thus reducing their competitiveness?
In South Korea, there are successful domestic platform companies in the fields of search, mobile messaging, and e-commerce. If DMA-style regulations were to be introduced, the competitiveness of these companies would be affected. While these companies dominate the market in South Korea, their global influence is minimal compared to the large U.S. platform companies, so they require more investment and innovation. Due to the investigative capabilities and data accessibility of the KFTC, however, it is difficult to expect that the enforcement of new regulations will be carried out equally for domestic and U.S. companies. Even if enforcement were equal, there are concerns that the chilling effect of such enforcement would have a greater impact on domestic companies.
Who is seen as the biggest competitive threat to South Korea?
Mostly the United States. Recently, however, China is becoming the biggest threat in e-commerce. Coupang is maintaining its position, but other South Korean companies have been driven to bankruptcy (Tmon, WeMakePrice).
Does reform of the Competition Act target, or disproportionately affect, U.S. companies?
According to the news, only five companies would be covered: Google and Apple, and then Naver, Kakao, and Baemin. So, two U.S. companies and three South Korean companies. The KFTC attempts to find a balancing act between U.S. and domestic companies. Google, Apple, and Meta are very concerned about the recent developments. And so is Coupang. But we should understand the position the KFTC is in and the pressure it is under. In a nutshell, and as previously discussed, the KFTC desires special regulatory authority over online platforms. But they face opposition and pressure against introducing new platform regulations from the Presidential Office and other economic ministries aiming to promote the digital economy, as well as from experts and industry. On the other hand, opposition party members, who hold a majority in the National Assembly, are attempting to introduce new platform regulations. As a result, the KFTC faces the challenge of politically harmonizing the voices of both sides.
No Chinese companies would be caught by the new rules?
For the KFTC, the mission is taking the initiative for digital regulation. They really want to be in charge of this. After they achieve this, they might try to expand their power and cover more companies—more Chinese, U.S., South Korean, or others. Even though there’s only five companies covered under the new regulation, they can still use other tools to target Chinese companies.
Are there any other proposed digital regulations we should be aware of, such as regulation of AI?
The digital economy is facing new opportunities and challenges. South Korea is contemplating introducing a new AI act, but this would not be “regulation,” strictly speaking. It would focus on how to promote the AI industry, not just regulate the risk. It would therefore be different from the EU’s AI Act.
The KFTC has a different position. They are conducting a market study on the AI industry, similar to the UK Competition and Markets Authority initiative. AI experts are, however, concerned that these attempts by the KFTC will lead to economic regulations, resulting in the KFTC undermining the current policy governance that focuses on promoting the artificial-intelligence industry. All in all, the KFTC seems to be adopting a pessimistic view of AI industry competition environments that is similar to the approach of EU AI Act, and that is constantly looking for space and opportunities to intervene. They are worried that the economy could tip further to strengthen the big online platforms.
What do you think of that? Is AI regulation warranted and, if so, what kind?
The AI legislation currently under discussion in South Korea is focused on promoting the AI industry and enhancing its competitiveness. The key issue is whether to include social regulations related to the safe use of AI and, if so, to what extent. In this context, if the KFTC intervenes in the AI industry by enforcing existing laws, it may be seen as a premature attempt to impose economic regulations on an AI industry that still has a long way to go industrially.
This has been a great discussion, Professor Hong. Are there any past or upcoming papers or projects of yours that people should keep an eye out for?
As a competition-law opinion leader in South Korea, I have written various articles for Korean readers over the past few years about the development of competition law in South Korea’s online-platform sector. Some of the titles include: “Online Platform and Fair Economy Policy: Issues of Transactions Fairness Regulation” (2021); “Recommendations for the New Government’s Fair Trade Policy: Focusing on the Online Platform Sector” (2022); “Improvement Direction of Online Platform Legislation: Focusing on Competition and Fair Trade Laws” (2023); “Is the Enactment of Special Legislation for Online Platforms a Solution to Potential Problems in the Platform Industry?” (2023); and “Proposal for Platform Competition Promotion Act: Is It the End of Competition Law, or a New Chapter?” (2024).
But these articles were not written in English, making them inaccessible to international readers. The English-language piece I have written is an op-ed co-authored with Daniel Sokol for a Korean English-language newspaper titled “Korea Should Prioritize Innovation, Not Misguided Platform Regulation,” and I have also shared presentation materials from international academic conferences on LinkedIn. This interview has made me realize that there is significant interest abroad in the development of competition law in South Korea’s online-platform sector, so I plan to write more articles accessible to international readers in the future.
