The KFTC’s newly softened stance on regulating the conduct of big tech firms marks South Korea’s fourth attempt to address competition issues in the digital economy
The KFTC has announced yet another new plan for regulating competition in digital markets
On 9 September 2024, the Korea Fair Trade Commission (KFTC) announced a new legislative proposal to further regulate competition in digital markets. The proposal offers a series of recommended amendments to the Monopoly Regulation and Fair Trade Act (MRFTA) that would better equip the regulator to address the anti-competitive behaviour of big tech platforms. The announcement signals a significant shift in the country’s approach to digital markets regulation, moving away from multiple different, earlier plans to introduce an ex-ante framework similar to the EU’s Digital Markets Act (DMA) and instead empowering the KFTC to pursue stronger ex-post enforcement. The newly proposed legislation also reflects the perceived shortcomings of prior amendments to the Telecommunications Business Act, referred to as the “Anti-Google Law”, in regulating anti-competitive behaviour in the app store market.
The proposed amendments are likely to capture fewer firms than the EU’s DMA, although some domestic platforms will be targeted
The KFTC’s proposed amendments include changes to the thresholds for identifying dominant firms, as well as a limited introduction of newly identified anti-competitive practices and an expansion of the regulator’s enforcement tools. Under the terms of the revised MRFTA, platforms would be considered dominant if they secure more than a 60% market share and maintain 10m users, or if three or fewer platforms combine to hold more than an 85% market share and each maintain more than 20m users. These thresholds are proportionately much higher than the DMA’s threshold for designating gatekeepers, which qualifies firms as dominant if they maintain 45m active users. The KFTC also includes an exception for firms with South Korean revenue under KWR4tn (£2.3bn) in order to reduce the regulatory burden on start-up firms. These standards are likely to capture commonly targeted US firms, including Apple, Google and possibly Meta or Microsoft, as well as domestic search engine Naver and super-app Kakao.
Prohibitions on anti-competitive behaviour will be balanced against other public policy objectives, including platform resilience and privacy
The amendments would also prohibit four types of anti-competitive behaviour – self-preferencing, tying or bundling services, restricting multi-homing of content and offering preferential to some other parties – across six markets: brokerage, search, video, social networking, operating systems and advertising services. Firms accused of abusive conduct would, however, be able to defend their practices as necessary for maintaining platform security, privacy protections or resilience. These allowances are notable in the context of the Government’s broader response to recent failures in platform resilience, particularly following a 2022 Kakao outage that triggered an investigation and ultimately direction issued by the Ministry of Science and ICT (MSIT). While the UK’s Digital Markets, Competition and Consumers (DMCC) Act offers similar exceptions for prohibited behaviours, the KFTC would appear more likely to offer more significant weight to justifications for anti-competitive conduct. In the event a firm is found to have violated the law without an appropriate justification, the KFTC will also be empowered to issue larger fines of up to 8% of a firm’s South Korean revenue and issue temporary suspension orders.
South Korea is bucking the trend towards stricter, ex-ante regulation of digital markets following the passage of the DMA
The KFTC’s latest proposal marks the fourth attempt to regulate digital markets and yet another evolution in the South Korean Government’s answers to questions of how to enact and enforce legislation. This announcement follows not only the failure of the competition authority to pass its earlier Online Platform Fairness Act, but also the continued challenges faced by the Korea Communications Commission (KCC) in enforcing its amendments to the Telecommunications Business Act. The KFTC has also now abandoned plans to pursue the adoption of a Platform Competition Promotion Act, which would have more closely resembled the DMA and aligned South Korea with a number of other countries (e.g. Brazil, India, the UK) in adopting EU-style digital markets regulation. South Korea’s step back from ex-ante regulation also distinguishes the KFTC’s plan as a less interventionist approach than that taken in Japan through the recent Act on Promotion of Competition for Specified Smartphone Software and marks a rare instance in current regulatory trends in which a government has softened its stance on digital markets.
