Stricter checks needed to weaken dominance

By Kim Yoo-chul

Taurus Investment Trust analyst Kim Il-tae

The nation’s regulator should beef up monitoring on NHN, the operator of the nation’s dominant Web portal, Naver, in order to prevent the dominance from killing smaller players in the industry, according to an IT expert, Tuesday.

But he also pointed out that the control will be carried out in a very sophisticated manner to avoid infringing on consumers’ rights of choice.

In an interview with The Korea Times, Kim Il-tae, a senior fund manager at Taurus Investment Management, said that the government needs to closely monitor NHN for any potential wrongdoings.

He added it’s not desirable for the portal operator to extend its significant power into non-core businesses such as real estate and wholesale because doing so may kill smaller firms in those industries.

“What I want to say is that NHN needs to find measures to increase its corporate awareness. Giving developers a higher ratio of returns over earnings, holding forums for developers and providing visible support to SMEs are possible actions NHN can take,” he said.

NHN is now under siege as lawmakers and regulators are joining forces to urge the firm to reduce its tremendous power over advertisers and software developers and promote balanced growth with local small and medium enterprises (SMEs) in order to produce diversified content.

Kim, however, pointed out that the government should be more prudent in regulating the firm because its excess interference in the mobile content industry can hurt consumers’ rights.

“Basically, ‘winner takes all’ is the formula in the Internet portal business. Users search for information they need via Internet portals, and this means popular and big portals have greater user numbers. This is the nature of the business,” said Kim.

Citing similar situations in other countries ― Google dominating in the United States with a 67 percent share, Baidu in China with 78 percent and Yahoo in Japan with 54 percent ― the fund manager said NHN’s 74 percent local market share is not a surprise.

“When you talk about mobile messengers, you may claim that NHN controls too much of the market. But users are generally inclined to frequency rates. Kakao Talk here, NHN in Japan and WeChat in China each control 70 percent of the national market. That’s why the bargaining power should be centralized,” Kim said.

About Seoul’s recent announcement to release a set of measures to limit the accessibility of web board games, the fund manager said the measures will hurt what he claims are the basic rights of game users.

The proposed policies, which include limiting monthly game money purchases, activating playing bans for daily losses and mandating identification certification for access, have triggered an industry backlash.

“The regulatory stance doesn’t make any sense,” Kim said.

Finally, Kim pointed out the government needs to reconsider implementing the above “mobile shutdown” measures because he believes the measures will hurt NHN’s global competitiveness.

“The local mobile gaming industry is just starting to take off. Still, local gamers already prefer games that run on Apple iOS and Google Play software. If the government pushes to implement the regulatory measures, the related industries will lose more value.”

The Fair Trade Commission (FTC), the nation’s top antitrust agency, is still investigating NHN for possible unfair business practices. The FTC recently visited NHN’s headquarters to inspect their offices and collect documents.