By Kim Hyun-cheol
Staff Reporter
Criticism is increasing over the regulator's decision to allow e-Bay to acquire G-Market, making the U.S. giant, which already owns the largest Korean online marketplace Auction, a dinosaur on the local online shopping market.
The Fair Trade Commission (FTC) Friday gave the green light to the world's biggest electric commerce firm's plan to acquire G-Market, on condition that the company establishes measures to protect small- and medium-sized sellers on the Web site and keeps its commission on sales fixed for the next three years.
With the deal completed, e-Bay will have an 82.7 percent share in the online open market here, and nearly 30 percent of the whole Korean online shopping business, which amounts to around 15.8 trillion won ($13.6 billion) last year.
In May, the American heavyweight signed a memorandum of understanding with G-Market operator Inter Park on the deal, before requesting approval from the FTC.
"This tie-up could be subject to prohibition, because sellers on an online open market could fall prey to the operator's collusive actions, especially for small- and medium-sized online merchants," the FTC said.
"But emergence of new competitors is easier on Internet businesses. The tie-up of auction and G-Market is likely to make portal Web sites enter into the business. Such dynamics are expected to keep the chances of monopolistic side effects from lasting long."
The antitrust body cited G-Market and several overseas cases like American Web open market, amazon.com, and China's EachNet. While G-Market jumped to top the local market in a short period of time since its foundation in 2001, EachNet, e-Bay's Chinese unit, is currently staggering on the market due to failure in localization.
Auction and G-Market, in combination, account for 41 percent of the entire Korean Internet shopping business, according to the FTC data.
"This is the first case made upon turbulent Internet market circumstances, unlike previous restrictive actions according to market share," the FTC said. "This will in the long run contribute to encouraging fair competition of the market through more mergers and acquisitions."
Critics, however, point out the lenient decision is contradictory to the agency's earlier decision on Naver, the nation's No.1 portal Web site.
Earlier this month, the FTC confirmed its decision in May to define the company as a "dominant player," which means Naver, like SK Telecom or KT in the same classification, will be under stricter regulations than other competitors in the business.
Naver's 48.5 percent share in total revenue of Internet companies as well as its 69.1 percent share of the Web search engine market at the end of 2006 makes it feasible to call it market-dominant, according to the FTC.
The Fair Trade Law stipulates a company owning more than 50 percent of a certain market is defined a dominant company. The same rule is applied to the largest company of a market, where the top three players, in combination, take up over a three quarters' share.
Analysis shows the market share of Auction and G-Market is way higher than the FTC assessment.
Rankey.com, an Internet data analyzing firm, announced last month visits of the two firms' Web sites amounted to 17.3 million hits, about 96 percent of the average monthly visits for online shopping malls and open markets.
Some business sources say the FTC is too loose in its understanding of the industry, by overestimating the role of competition when the market is already showing signs of consolidation, unlike the agency's rosy expectation.
Since Auction and G-Market emerged as the two frontrunners, a couple of conglomerates have tried to flex their muscles in the rapidly growing industry only to hit the skids. This shows the entry barrier has already become so high, blocking new entries, according to experts.
Overshadowed by the rivalry, CJ gave up on Mple.com last year while GS e-Store, run by GS Home Shopping, has been making less-than-expected showings lately.
In a nutshell, the decision did nothing but pave the smooth way for foreign-based firms to infiltrate local businesses, critics say.