Naver under fire for unfair marketing practices
Naver Logo / Courtesy of Naver
By Kim Hyun-bin
Naver, the country's leading internet portal, is once again drawing negative attention for trying to sneak in advertisements to enhance benefits for its paid members, which many critics claim is an abuse of its dominant market power.
In March, the company dominated 73.3 percent of the domestic PC search engine market.
According to industry officials, starting June 1, all Naver Pay member stores will have an icon that displays “Naver +” on their product preview page, which indicates the stores will provide extra benefits to customers who purchase their products using Naver Pay.
Sellers will need to pay monthly for Naver + membership, which will make their products more prominent in search results and will allow customers to receive additional Naver Pay points for their purchases.
Debate contines as the move could be seen as Naver using its dominance as a portal to promote its own marketing agenda and services, while leaving non-members at a disadvantage, which the FTC sees as an unfair practice.
Naver founder Lee Hae-jin
The Fair Trade Commission (FTC), the country's top antitrust regulator, said Naver's using its market power to promote its own services over competitors is an unfair transactional practice. This is not the first time Naver has tried to slide in its company marketing promotions. In 2013, the FTC slapped a 100 billion won fine on the firm for disguising advertisements as search query results, which deceived its portal users.
The incident marked the first time a fine was imposed against an online portal company for abuse of its dominant market presence, but Naver contended at the time that the ads that appear alongside search results should be seen as information not advertisements.
In 2018, the company was embroiled in several investigations regarding unfair practices.
Many claim that the country's leading search portal is blatantly trying to advertise its Naver + membership in an effort to persuade stores to register while at the same time aiming to increase its Naver Pay user base.
Naver has been endlessly trying to persuade portal users to adopt Naver Pay, heavily promoting its benefits on the website.
In 2017, Naver put an “N Pay 3%” green icon on the right side of paid member stores' advertisements which was met with strong criticism from the industry, forcing the company to withdraw the icon which was then changed to “N Pay.”
“The logo shows consumers can receive additional benefits and we just added the + sign at the end. Other platforms also use the same method,” a Naver official said.
Naver's shopping mall also operated a separate check-out button for Naver Pay members for two months but that was taken down only after the Korea Communications Commission sent a warning letter telling the firm to revise it.
The company has been striving to significantly enhance its online shopping services to better compete in the market and industry watchers believe it established Naver Financial to aid in the expansion.
There has been an increase in calls for the government to strengthen restrictions and regulations to better prevent similar incidences as search engine industry regulations are unclear in comparison to those of other industries.
The FTC has recently established a taskforce to tackle the issue including creating competition standards for online platform businesses.