Growing unease over Korea's platform legislation

The U.S. Chamber of Commerce, a prominent advocate for U.S. businesses, has expressed reservations about the Platform Fair Competition Promotion Bill ('Platform Bill'), currently under legislative consideration by the Korea Fair Trade Commission ('KFTC'). This concern follows the disapproval voiced by the American Chamber of Commerce in Korea ('AMCHAM'). Notably, local businesses are also opposing the bill, contending that it could impose excessive regulations, potentially harming the local IT industry—an outcome starkly contrary to the bill's intended purpose.

The U.S. Chamber of Commerce expressed concerns over what they perceive as Korea's rush to pass platform legislation. In a released statement, they emphasized the importance of making the complete text of the proposed bill publicly accessible and urged the Korean government to facilitate extensive discussions and engagement with the U.S. government and business community. They worry that this legislation could pose a significant obstacle for American businesses, akin to the Digital Market Act set to be effective in the EU from March 2024, which targets major American tech giants such as Apple, Google, and Amazon.

The proposed Korean bill targets practices such as preferential treatment among affiliates, tied-in selling, restrictions on using competitor platforms, and the demand for most-favored treatment from contractors by large platform companies. These aspects, currently not addressed in the existing Electronic Commerce Act, would be subject to regulation. Designation of 'dominant business operators' will be based on factors like sales revenue, number of users, and market share, and those identified as such will face swift penalties if found engaging in prohibited activities outlined in the bill.

Both domestically and internationally, mounting concerns surround the proposed bill, especially given Korea's robust homegrown platforms such as Naver and Kakao. Korea is a crucial market for major American tech companies, making stringent local regulations a significant challenge. Local IT firms fear that Korean companies may bear the brunt of the regulation, while global tech giants headquartered overseas could potentially circumvent the rules. Critics argue that outdated regulations might hinder the growth of future potential platforms. Some notably point out that Chinese platforms such as TikTok and AliExpress, growing in the Korean market while operating beyond local regulations, could be the sole beneficiaries amid this uncertainty.

KFTC's inadequate coordination in the legislation procedure, inconsistent with its expressed commitment to legislation, has heightened concerns and criticisms. Despite claiming the bill is in its final drafting stage, the commission has not provided specific details, including target companies and criteria. To prevent potential trade disruptions, the Korean government should promptly release the bill's full text and formulate a tailored solution for our industry by actively seeking input from various local and foreign stakeholders.