By Cho Jin-seo
Staff Reporter
Internet giant NHN has faced public scrutiny for its antitrust behaviors and dubious online gambling business.
The Fair Trade Commission (FTC) ordered NHN, the operator of Naver portal and Hangame an online game site, to pay 227 million won in antitrust fines last week. The FTC also labeled NHN as a monopolistic player in the Internet market, which means that the Internet giant will be added to the watchdog's watch list from now on.
It is the first time that the FTC has acknowledged NHN's monopolistic status in the Internet market. Many expect that the company will receive a further blow if the FTC and other government agencies take more corrective actions.
``The designation as a monopolistic player can bring a `stigma effect','' said Kiwoom Securities analyst Jang Young-soo. ``Also, worries about possible regulations can discourage creativity at NHN and slow down its decision-making process.''
NHN accounted for 48.5 percent of the Internet portal market in terms of 2006 revenue. Its Naver portal processes more than 70 percent of search quarries from Koreans.
The firm has been a target of jealousy and criticism for years because of its dominancy in the Internet industry and unfriendly relationship with subcontractors and print media. Smaller Internet firms and many non-governmental organizations have asked the government to control NHN's influence on the Internet industry, saying it is urging unfair deals.
Kim Taek-jin, founder and CEO of NCsoft, an online game company, and Ahn Chul-soo, founder of computer security company Ahnlab, are among the people who have reproached NHN's behavior. They also pointed out that NHN does not open the database of Naver to other search engines, meaning that the vast amount of digital contents such as photos and blog posts on Naver cannot be searched on other search engines such as Google and Yahoo.
NHN has reacted furiously to the FTC ruling. The company issued a press release that it will take the case to the court. It hired Kim & Chang, the largest and most expensive law firm in Korea, as its attorney.
The company insisted that it is unfair to regard the Internet portal industry as a monopolistic market because there is no entry barrier to new players and the price of its services are basically free.
``The reason NHN is considering a lawsuit is that it wants to prevent further regulations and protect its corporate image,'' Jang said.
Others worry that more damage can be delivered to NHN if the government starts to probe online gambling games.
Non-government organizations also denounce the firm's online game portal site Hangame, where people play poker and blackjack against each other. These games, called Web board games in the industry, are played with cyber currency, which can be easily cashed out via online black markets. NGOs asked police to charge NHN, saying it is deliberately overlooking and fostering such illegal activities.
``NHN has a high growth rate not in the search and portal sector but in that of Web board games. We think the quality of growth at NHN has deteriorated in general,'' said CJ Investment & Securities analyst Shim Jun-bo in his report. He estimated that about a half of the firm's profit comes from the so-called Web board games.
indizio@koreatimes.co.kr