[Op-Ed] The Online Platform Act: A Legal Barrier to Innovation

As controversy grows over the Fair Trade Commission’s decision to impose a record-high surcharge on Coupang, the Online Platform Act is once again drawing attention.

The Online Platform Act was pushed by the Fair Trade Commission in the 21st National Assembly but was scrapped, and it is now being reintroduced in the 22nd National Assembly, led mainly by the opposition party.

Because this bill contains strong ex ante regulations on platform companies, opposition from the startup sector and academia has continued.

The push for the Online Platform Act should be reconsidered.

The Fair Trade Commission took issue with Coupang over alleged manipulation of search rankings and reviews mobilized through employees, imposing a surcharge of 140 billion won.

As this shows, online platform companies can already be sanctioned sufficiently under the current system.

Introducing the Online Platform Act despite the existence of the Monopoly Regulation and Fair Trade Act raises concerns about “double regulation.”

Korea’s domestic distribution industry has always grown under the pressure of regulation.

At first, regulations on large discount stores were introduced under the banner of protecting traditional markets and neighborhood commercial districts.

Now, as the online retail market has taken the lead, the regulatory spotlight has shifted to the online retail platform sector.

At a time when criticism continues over the effectiveness of regulations on large discount stores, we should not repeat the policy mistake of undermining the competitiveness of Korea’s distribution industry simply because certain firms are large.

The Online Platform Act clearly has problems in several respects.

First, it lacks sufficient market analysis.

Korea’s platform regulations benchmark platform market laws such as the EU’s Digital Markets Act (DMA).

However, Korea differs from Europe.

In Europe, the market is dominated by U.S. Big Tech firms, so regulation can work in ways favorable to Europe. In Korea, by contrast, domestic online platform companies are still growing, so such regulation would instead be harmful.

Second, there are concerns that it would weaken the competitiveness of Korea’s online platform businesses.

According to the proposed bill, platforms subject to regulation are determined based on sales.

However, overseas online platforms may fall into a regulatory blind spot.

In the case of AliExpress and Temu, which have recently grown rapidly in Korea, their sales in Korea are expected to exceed at least 1 trillion won, but because they do not disclose their actual sales figures, regulation becomes difficult.

In the end, only domestic firms would become subject to regulation in global competition, resulting in a loss of competitiveness.

Third, regulation may in fact encourage monopoly.

In other words, regulation may hinder free competition and produce the unintended effect of protecting vested interests.

Coupang may be able to afford a massive surcharge, but growing startups cannot respond in the same way.

Therefore, if platform regulation is strengthened, the growth potential of Korea’s distribution industry will be undermined, and the damage will ultimately be passed on directly to consumers and small business owners.

Korea’s platform policy also appears to run counter to international trends.

China, a major competitor to Korea’s domestic distribution platform companies, is pursuing the nationwide “Digital China” strategy.

Likewise, the United States has prepared the United States Innovation and Competition Act (USICA) to strengthen its own industries.

While other countries are working to strengthen their domestic platform companies, Korea needs to consider whether suppressing the growth of its own platform firms is truly the right direction.

Innovation must not be obstructed in the name of establishing a fair trading order.

In the online platform sector, which provides benefits to consumers and creates potential jobs, Korea’s companies should be allowed to compete freely.

That is the surest path toward innovation.

I hope the government does not make the mistake of undermining the efficiency of the economy as a whole through regulation.

Dongmin Lim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 온플법, 혁신의 길을 막는 법적 장애물

Author: Dong-min Lim

Date: 2024-11-25

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=3&idx=27092