Korean tech giants including Kakao, Naver, Coupang and Woowa Brothers is facing increasing scrutiny from authorities over allegations of violating fair trade laws, monopolizing markets, and accounting fraud.
These platform companies experienced rapid growth over the past 10 years, solidifying their dominance in wide range of local businesses from search engines to food delivery. However, criticism of monopoly, employee mistreatment and conflicts with existing systems persist.
The undisputed search engine leader in Korea, Naver has been accused of manipulating its news algorithm, allegedly intervening in news search by altering the ranking of media companies' popularity. Naver's market share stood at 58.5 percent as of August, according to website analytics firm Internet Trends.
Korea Communications Commission (KCC) initiated an inspection on Naver in July this year, then conducted a fact-finding investigation in September after suspecting that the company may have violated regulations on prohibited acts. KCC dispatched 10 investigators to Naver headquarters on Sep. 6. to determine whether its news service breached the Telecommunications Business Act.
Woowa Brothers, operator of Korea's largest food delivery app Baedal Minjok (Bae Min), has recently been suspected of leveraging their market monopoly to impede startup growth.
Rep. Kim Hoi-jae of the Democratic Party of Korea stated during a national audit last month that Bae Min implemented technical measures to restrict startups from accessing annual sales information, demanding payment for its use. Kim argued that this action violated data sovereignty, emphasizing that the actual data owner is the general business owner.
Experts say that platform giants are constantly criticized for monopolistic and abusive behavior because societal expectations regarding fair trade are high, but response to such criticism has been slow.
"While platform companies built successful businesses based on innovative ideas, they appear to have neglected social responsibility, lacking adequate safety measures in exercising their monopoly position," said Park Kyung-seo, a professor of managemen at Korea University.
Unlike traditional markets where companies sell goods and services directly to buyers, platform companies mediate the transaction between buyers and sellers, acting as the middleman. As a result, conflicts among various stakeholders have increased dramatically over the years, but with the platform industry growing at full speed, necessary regulations have not been made in time.
Numerous bills related to online platform regulation have been proposed in the National Assembly, though none have been enacted. The Online Platform Fairness Act was submitted by the Korea Fair Trade Commission (KFTC) during the last government, but discussion has been suspended due to concerns about reverse discrimination against domestic businesses.
"The platform industry can be subjected to endless criticism or encouragement depending on where people stand on opposing perspectives," said Kim Jun-ik, a professor of management at Konkuk University. "However, given the impact of platform companies on economic growth, governments need to strike a balance between encouraging innovation and appropriate regulation," he continued.
This article was originally published on Nov. 14, 2023.