Back-to-Back Platform Regulation Bills… Start with a Market-Based Ex Post Approach

Regulatory legislation targeting platforms has recently been pushed forward one after another. A wide range of regulations is being introduced in a short period, including the Online Platform Fairness Act, a cap on delivery app commissions, the legalization of holdbacks, and the “Doctor Now Prevention Act.”

It is true that calls for government intervention have grown louder as the boundaries between industries rapidly collapse and platforms increasingly serve as distribution infrastructure across the broader economy.

However, it is concerning that the direction of regulation is moving toward constraining business models themselves even before any actual problems arise. The platform industry is characterized by rapid technological change and intense market competition, so excessive ex ante regulation is highly likely to stifle innovation and reduce consumer welfare.

The problem with current regulatory discussions lies not so much in the “need for regulation” itself as in the “method of regulation.” Blanket bans on certain conduct by platform companies, along with burdens requiring them to prove the legitimacy of their actions, create difficulties in distinguishing between legitimate competitive strategies and anticompetitive conduct.

Given the platform industry’s nature as a two-sided market, some conduct may hinder competition in certain cases, but in others it may lead to lower consumer prices and improved service quality. Nevertheless, the regulations take the form of ex ante restrictions that prohibit such conduct based merely on “potential risk.”

When the platform industry is subjected to excessive regulation, consumers and small business owners are the first to bear the burden. When some U.S. cities introduced caps on delivery app commissions during the COVID-19 period, platforms passed on their reduced revenue to consumers through higher fees, and delivery charges actually rose. Order volumes declined, and service quality deteriorated. This is why many cities ultimately had no choice but to repeal or relax the policy.

Platform commissions include a variety of service functions, such as payment processing, data analysis, advertising, and matching with delivery riders. If this cost structure is artificially constrained through a cap, platforms have little choice but to adjust in other ways, such as raising advertising fees, reducing services, or restricting merchant entry. The result is a vicious cycle in which consumers, small business owners, and delivery riders all suffer.

What matters is not arguing against regulation itself, but considering what kind of regulation is effective. The platform industry changes rapidly in technological terms and has a complex service structure. Therefore, rather than prohibiting certain conduct in advance based solely on the possibility that a problem may arise, ex post regulation or self-regulation is more appropriate—intervening when actual anticompetitive effects appear.

Ex post regulation has the advantage of clearly identifying problematic conduct and resulting harm, making responsibility easier to assign while avoiding the chilling of normal competitive strategies. If this is combined with industry self-regulation and guidelines on matters such as algorithmic exposure criteria, advertising labels, and commission disclosure, transparency and user protection can be strengthened without undermining platforms’ incentives to innovate.

The direction Korean platform policy should take is clear. First, it should establish standards suited to market conditions rather than relying on ex ante regulation. Second, while responding strictly to anticompetitive conduct, it should build a balanced regulatory framework that also protects competitive strategies that enhance efficiency.

Finally, consumer choice and welfare must be placed at the center of regulatory design. Platforms have already become core infrastructure in our economy. The purpose of regulation is not to suppress business, but to ensure that the market functions in a way that delivers better services. What is needed now is not more regulation, but better regulation—and a shift in how we view the market.

Sung-no Choi, President, Center for Free Enterprise (CFE)

---

Original title: 연이은 플랫폼 규제입법… 시장중심 사후규제 해법 부터

Author: Sung-no Choi

Date: 2025-12-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28331