Problems of Platform Regulation and Policy Implications.

Recently proposed platform regulation bills seek to more swiftly sanction anticompetitive conduct by monopolistic or oligopolistic platforms by:
(1) presuming or pre-designating platforms with significant influence as dominant platforms based on criteria such as market share;
(2) prohibiting four types of conduct—self-preferencing, tying, restrictions on multihoming, and most-favored-nation (MFN) requirements—by such platforms; and
(3) imposing the burden of proof regarding the legitimacy of these practices on the dominant platforms themselves.

This regulatory approach largely draws on the EU’s Digital Markets Act (DMA) and Germany’s 10th amendment to the Act against Restraints of Competition (GWB), both of which primarily target large U.S.-based platforms. In the EU’s case, political and economic considerations—namely the protection of domestic platforms and the enhancement of their competitiveness—played a significant role in the decision to designate U.S. tech giants as gatekeepers subject to ex ante regulation. However, in the Korean platform market, U.S. platforms do not hold dominant market shares, and competition among platform firms is already intense. Moreover, enforcement of competition law against foreign firms often faces practical constraints, increasing the likelihood that platform regulation will disproportionately affect domestic firms.

Next, measuring platform dominance in two-sided markets solely on the basis of market share may be inappropriate. As is well known, platforms may price below marginal cost on one side of the market in order to increase profits on the other side. In such cases, a platform with a higher market share on both sides may earn lower profits than a competing platform. Therefore, a high market share in a two-sided market does not necessarily translate into high market power.

Meanwhile, the four prohibited practices may, in certain circumstances, promote competition and enhance consumer welfare, making it difficult to conclude that they are inherently anticompetitive. First, when a platform possesses strong bargaining power in wholesale contracting, self-preferencing may involve greater price reductions for its own products, thereby increasing both consumer surplus and overall social welfare. In competitive environments, preferential treatment of a platform’s own products combined with quality improvements can also serve as an effective competitive strategy.

Although tying allows a platform to leverage dominance from a core service market into an ancillary service market, it can also reduce costs through economies of scope by integrating multiple services. Consumers may benefit by purchasing bundled services at lower prices than they would pay for each service separately. Moreover, entry into ancillary markets through tying may intensify competition within those markets.

In competitive bottleneck situations—where users on one side of the market single-home while users on the other side multi-home—platforms compete aggressively to attract single-homing users (typically consumers), while exercising monopoly power over multihoming users (typically sellers). This dynamic disadvantages multihoming users, and if they possess some bargaining power, it may also disadvantage the platform. To address this, platforms and multihoming users may have incentives to restrict multihoming through exclusive contracts. While such arrangements can increase the profits of both platforms and multihoming users, they may soften competition in the single-homing market and reduce consumer welfare.

Most-favored-nation (MFN) clauses require sellers (or merchants) to offer transaction terms on a platform that are equal to or more favorable than those offered on competing platforms. If MFN clauses are viewed not as horizontal price collusion between platforms and sellers, but rather as unfair trading practices or vertical restraints, they may generate efficiency-enhancing effects. For example, when competition among platforms is more intense than competition among sellers, MFN clauses may encourage greater platform investment, thereby increasing consumer welfare.

In conclusion, legislative proposals that directly replicate the EU and German ex ante regulatory models are ill-suited to Korean market conditions and lack sufficient justification, warranting reconsideration. Furthermore, since the competitive harm of the four prohibited practices is not self-evident, enforcement should be limited to ex post sanctions only when the competition authority demonstrates anticompetitive effects. If the per se illegality principle is to be applied exceptionally to anticompetitive conduct by dominant platforms, a clear and reasonable justification must be provided.



I. Background and Purpose of the Discussion

II. Problems with Presuming Dominant Platforms

III. Competitive Effects of Prohibited Conduct by Dominant Platforms

1. Self-Preferencing

2. Tying

3. Restrictions on Multihoming

4. Most-Favored-Nation Requirements

IV. Policy Implications

References

Korean version: https://www.cfe.org/20250811_27964