FTC vs. Naver

By Kim Hyun-bin, Nam Hyun-woo

The Fair Trade Commission (FTC) is cracking down on Naver, the country's dominant portal, for its monopolistic domination of and misconducts in real estate information services, online shopping and video streaming platforms.

This comes after the country's top financial regulator fined the company 1.03 billion won ($840,000) stating it prevented its real estate information partners from providing the same data to its rival Kakao, Sunday.

However, Naver immediately refuted the claims and has asked its lawyers to review the ruling.

“Naver will act to secure our rights and for the future growth and stabilization of the real estate information services market. To do so, we are reviewing legal measures to counter the ruling,” Naver said in a statement released Monday.

Industry watchers say it is unprecedented for the country's leading portal to reject an FTC ruling.

“It is a rare occurrence for Naver to reject an FTC ruling, and to mention the name of the competitor firm in its claim, even though Kakao did not report the incident to the FTC,” an industry official familiar with the matter said.

According to the FTC, between 2015 and 2017, Naver listed more than 40 percent of real estate sales in the country on its platform, which shows in real time the estate listings and contact details for realtors. The company took over 70 percent of page views compared to other similar services.

Naver initially began collecting real estate data on its own and later outsourced the data for review to the Korea Internet Self-governance Organization (KISO). The company later uploaded the filtered version of properties on its real estate platform.

In February 2015, Kakao attempted to create a partnership with seven real estate content providers affiliated with Naver. The FTC says Naver added an extra article to its contracts with real estate information partners forbidding them from providing information to third parties, such as Kakao. A year later, the company added another article that allows it to terminate contracts with companies that are in violation of the terms of their agreement.

The battle between Naver and the FTC is expected to be prolonged as there are other cases that are currently under review, as the country's leading portal is accused of placing its own shopping and video platforms at the top of search results in order to reel in more users to its platforms.

This is not the first time the FTC and Naver have clashed over the IT firm's market dominance.

In 2013, the FTC investigated Naver on suspicions that the web portal abused its monopolistic status in real estate services and online commerce.

As the FTC expanded its investigations into web portal companies, Naver's competitor, Daum Communications (now Kakao), was also placed under the agency's scope on suspicions that the companies did not separate ads and search results, as well as violating the Fair Trade Act.

Over the FTC's move, then Naver chief Kim Sang-heon said the company did not abuse its market position, claiming the firm's market dominance was “consumers' choice on the quality of the web search service,” which was enabled by the company's efforts for innovation.

As the FTC planned to impose fines worth tens of billions of won against Naver and Daum, however, they threw in the towel, proposing a consent order to the agency. A consent order is an agreement between a company being investigated and the antitrust agency in which the former pledges to correct problematic practices without a judgment being made on the legality or illegality of the practices.

With the FTC accepting the consent order, Naver and Daum avoided hefty fines at the time, but industry officials say it is different this time, as the FTC is currently focused on investigating ICT companies under Chairwoman Joh Sung-wook's directions.

In a press conference as FTC chief nominee last year, she pledged to take a closer look into Google and Naver, highlighting the necessity of regulating ICT firms' practices. After she took the post, the FTC established a special team looking into ICT firms, setting up guidelines for web portals, shopping websites, delivery apps and other platform businesses.

The fresh decision is interpreted as a signal that the antitrust agency will tighten the reins on Naver.

Currently, the FTC is investigating suspicions that Naver committed unfair practices in shopping and video streaming services by using its monopolistic status. On Naver's shopping business, the FTC held a commissioners' meeting last month and plans to hold another meeting on the company's video streaming business later this month.

“The FTC will continue monitoring the market to prevent monopolistic platforms from unfairly excluding rivals from competition,” an FTC official said.