'Naver the online predator'
Big portal dominates, dictates flow of information on cyberspace
By Kim Yoo-chul
NHN, operator of Korea’s dominant online portal Naver, is emerging as a public enemy for destroying the cyber ecosystem by expanding its territory to non-core businesses at the expense of smaller players.
It has become a principal target of monitoring by the Park Geun-hye administration which has pursued “shared growth” to ensure a level playing field.
The Fair Trade Commission (FTC) is currently investigating NHN for abusing its bargaining power and distorting the market.
FTC officials and other sources told The Korea Times that the regulator will heavily fine NHN for monopolizing the market, which it believes damages significantly the soundness of the local online content industry.
“NHN may insist that its dominance is due to consumer choice, and that’s understandable. But the fact is that we don’t see many small-scale content providers with strong competitiveness. The government needs to actively intervene in the industry to ensure fair competition and a better business ecosystem,” said an FTC official, asking not to be named.
He said that the FTC has collected evidence of the firm’s illegal business practices. FTC Chairman Noh Dae-lae has also vowed to punish the portal operator for excessively dominating the market and limiting consumer choices.
The ruling Saenuri Party plans to introduce a bill to address monopoly issues created by NHN in September.
In a recent speech during a parliamentary session, Saenuri’s floor leader Choi Kyung-hwan pointed out that major Internet portal operators are pressuring their content suppliers and monopolizing investment, production and distribution of content.
Rep. Kim Yong-tae of the ruling party echoed the view, saying, “Small firms are often being abused by large portal sites. We are mulling submitting a bill in September after thorough investigation and discussion.”
NHN controls around 80 percent of the local online search market. Small and medium content firms said survival has already been their focus because competition is impossible under the current market situation. Daum and Nate account for much of what remains in the market, according to data by the two companies.
The FTC said NHN has been forcing several content developers with which it has business contracts not to open business accounts with rival portals including Daum and Nate.
FTC officials said that the government agency found some evidence to support this claim.
“Local competitors such as Gmarket and 11th Street were not allowed to upload their services on NHN’s open market, Shop N. Only the N is allowed to sell goods and services on the online market, and this limits consumer choice and goes against fair market competition,” said the official
Will NHN surrender?
NHN officials said it is considering dropping some of its non-core businesses such as real estate, web cartoons, web fiction and music-related services, though a spokesperson said nothing has been decided yet.
CEO Kim Sang-hun admitted that technically his company enjoys this market dominance. However, he stressed it’s unfair that NHN is being criticized because of this.
“A monopoly isn’t bad in itself. It’s the side effects that come from monopoly that could be really bad. Consumers chose to use our portal. In today’s wired world, a user will see other similar services with a simple click,” the chief executive told reporters in an industry meeting in Seoul last month.
Citing Google and YouTube, Kim, a former judge, claimed any active intervention by the government in the market will hurt companies’ efforts to produce innovative products and discourage evolution in businesses.
Regarding NHN’s real estate- and media-related services, the executive insisted they contributed to the local market by providing more business opportunities to small- and medium-sized enterprises (SMEs).
However, small companies do not buy the CEO’s words.
“NHN had promised earlier that it will help small local ventures generate revenue under a new Internet ecosystem. But it failed to follow its pledge,” said Kim Min-seong, a 35-year-old businessman who is the CEO of a local content provider, which has been struggling to survive in the past few years.
Kim insisted that the Internet giant has so far been trying to improve its negative image by offering increased returns to developers, which he said was only a “tactical and one-off effort.”
“I think NHN should announce some comprehensive measures to help grow local SMEs. I believe it can join the ranks of other local conglomerates including Samsung, LG and Hyundai in terms of investing more to create better business ecosystems,” said Kim.
Despite the CEO’s defense of his company, however, it appears that the government will not change its stance and will continue to pressure the operator.
Choi Moon-ki, head of the Ministry of Science, ICT and Future Planning, expressed his concerns about NHN’s dominant market position at his first press conference last month as the minister.
He said NHN focused too much on external growth under the helm of a young CEO and urged the firm to think more about making a contribution to society.