[단독]Half-baked platform regulation law… Industry backlash leads to removal of ‘pre-designation system’

The key to preventing unfair practices on large platforms
“Excessive legislation that hinders IT growth” flood of opposition
To supplement by introducing ‘temporary suspension order’

The government is once again pushing forward with the enactment of the dinosaur platform regulation law, which had been postponed indefinitely due to opposition from the information technology (IT) industry. It has decided not to include in the bill the ‘pre-designation system’ that manages a small number of large platform companies by designating them as ‘dominant operators’ in advance. However, a temporary suspension order will be introduced to ensure that the sanctions do not end in the back of the head.

According to the National Assembly and other sources on the 5th, the government recently explained the core contents of the Platform Fair Competition Promotion Act (Platform Competition Promotion Act) to the ruling People Power Party and is coordinating the announcement date, aiming for as early as next week. Accordingly, the specific contents of the bill are expected to be disclosed around Chuseok.

The Platform Competition Act is a law that strongly punishes large platform companies when they push out competitors by engaging in unfair practices such as preferential treatment, bundling, multi-homing restrictions (obstructing competitors’ use), and demanding preferential treatment. The current Monopoly Regulation and Fair Trade Act can regulate such behaviors, but the aim is to apply a stronger law to companies with a certain level of sales or number of users. The Platform Competition Act will set a fine of up to 9% of the relevant sales. The current law caps fines at 6% of sales, but the level of sanctions has been raised.

The pre-designation system, which was originally considered the core of the Platform Competition Act, has been omitted. In December of last year, Chairman of the Fair Trade Commission Han Ki-jung, immediately after announcing his plan to promote the Platform Competition Act, explained the law as “a law that pre-designates a small number of dominant platform operators and imposes an obligation not to engage in unfair practices.” The idea was to designate platform companies that have monopolized the market, such as Naver, Kakao, and Google, as dominant operators and prohibit four unfair practices in advance. The intention was to reduce the government’s burden of proof for unfair practices and to speed up the response so that it does not become a “backdoor sanction.”

Immediately after the Fair Trade Commission’s announcement, the industry continued to voice opposition that the Platform Competition Act was excessive legislation that would hinder the growth of IT companies. In particular, concerns were focused on the pre-designation system, saying that it would brand large platform companies as potential criminals. In response, the Fair Trade Commission in February of this year indefinitely postponed the imminent publication of the bill, saying, “We will additionally review whether there is a way to effectively regulate platforms while reducing the burden on the industry, rather than the problematic pre-designation system.” This was only 50 days after the plan to enact the Platform Competition Act was announced after a year of discussions with experts and relevant ministries.

As the government has finally decided to remove the pre-designation system after seven months, some are pointing out that the platform regulation law has become half-baked. The European Union (EU), which enacted the Digital Markets Act (DMA), which was the origin of the platform competition law, as well as Japan and Australia, are creating laws to manage large platforms by designating them in advance.

Instead, the government decided to introduce a ‘temporary suspension order’ to ensure that sanctions do not end up as an afterthought. A temporary suspension order is a system that temporarily stops the company’s illegal activities before the sanctions procedure is completed. The purpose is to quickly prevent damage such as strengthening market dominance through illegal activities. Such systems have already been introduced overseas, including in the EU and Germany.

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2024-09-06 17:12:33