Regulation Reflecting Online Platform Characteristics Needed for Transactional Superiority… “Efficiency Review Should Also Be Included”
A national research institution has pointed out that the current Fair Trade Act, which regulates the abuse of power by online platform companies, does not properly reflect the structure of the platform market. Specifically, the existing method of regulating the abuse of transactional superiority, which requires identifying individual victims before sanctions can be imposed, has lost its effectiveness in the platform environment, suggesting a need for improvement.
On October 22, the Korea Development Institute (KDI) released a report titled “Improvement Direction for Regulating Abuse of Transactional Superiority in Online Platforms” recommending a new regulatory framework that includes easing the burden of identifying victims, assessing the impact on transaction order, and reviewing efficiency.
According to KDI, the current Fair Trade Act requires identifying specific victim companies and proving the damage in the regulation of transactional superiority abuse. However, in the case of platforms like delivery apps, e-commerce, and content platforms that propose uniform transaction conditions to numerous businesses, victims are widely dispersed, making it virtually impossible to prove.
The Fair Trade Commission has struggled with handling platform cases such as delivery apps, lodging apps, and online markets due to court rulings that necessitate identifying individual victims in transactional superiority cases. KDI suggested in its report that since platform rules apply uniformly to many businesses, regulations should be applied when common circumstances of general victims are identified, similar to the example of the large-scale distribution law.
KDI also argued that efficiency review procedures should be introduced in platform regulation. Traditional abuse of power regulation focuses on protecting victims, but since platforms have a multi-sided market structure, benefits could accrue to third-party stakeholders. The report noted that “although changes in platform commission policies may disadvantage some sellers, they could appear as price reductions or service improvements for consumers,” emphasizing that neglecting efficiency effects could worsen market welfare.
Furthermore, KDI analyzed that in the long term, the platform regulatory system should transition to a regulatory framework for the abuse of market dominance. Since platforms hold absolute positions as rule-makers effectively controlling market order, a framework for regulating market dominance abuse would be more appropriate than the existing transactional superiority regulation focusing on relative position.
However, for this transition, it is necessary to shift the current Fair Trade Act’s criteria for determining market dominance from being centered on market share to focusing on the ability to change transaction conditions, and like the EU, include ‘exploitative abuse’ in types of market dominance abuse.
As discussions on revising the Fair Trade Act are in full swing, KDI’s proposal attracts attention as a substantial way to strengthen ex-post regulation that complements the pre-regulation-focused ‘Online Platform Fairness Act’. This proposal is seen as an institutional improvement plan to enhance the justification and enforceability of regulations against unfair transactions by major platforms like Coupang, Naver, and Kakao.
However, concerns have been raised that this proposal could increase regulatory uncertainty in the platform industry. There are also concerns about the expansion of the Fair Trade Commission’s discretion due to ambiguous regulatory standards, which could reduce companies’ legal predictability.