Naver breached fair trade act: Nat'l Assembly

A Naver official explains the internet company's new design for its mobile application platform at Dongdaemun Design Plaza in Seoul on Nov. 16, 2018. / Korea Times photo by Shim Hyun-chul

By Kim Jae-heun

Naver has breached the fair trade act by limiting what a customer sees in search results to only what can be purchased with its payment system Naver Pay, the National Assembly Research Service (NARS) said Monday.

The legislative research agency added this case could also be seen as an act of monopoly power abuse.

Naver is a dominant player in the local search engine market with 74.7 percent of people in the country using the service as of 2017.

Currently, when a customer searches for a certain product on Naver, it does not show products that can be purchased with other payment systems like SSG Pay, Samsung Pay or Kakao Pay.

The NARS sees this as a wrongful way of attracting customers from its competitors' platforms and restricting their opportunity to pay with their systems.

Rep. Chun Jae-soo of the ruling Democratic Party of Korea (DPK) requested the legislative search agency to look closely into the matter.

“Naver should not limit customers' choice to pay with other companies' systems by abusing its dominant position in the market under the pretext of people's convenience,” Rep. Chun said. “This is a big matter as it can have a negative impact on the whole online platform market and customers' freedom of choice, thus the Korea Fair Trade Commission should look into it deeply.”

Naver refused to comment.

The internet giant has recently been under scrutiny by the top antitrust watchdog for a similar case alleging it positioned products that could be paid for with its own payment system on the top page of the search results at one of its online shopping platforms, Naver Store Farm.

Naver denied its fixing of the search results, saying its algorithm system was based on artificial intelligence, which exposed the products randomly.

The KFTC is yet to release the outcome of its inspection, but the IT firm could receive punishment ranging from a mere recommendation to improve the business behavior to a penalty, or even be ordered to withdraw its online shopping business at worst. It is highly likely that Naver will no longer give preferential treatment to its own payment system.

Last month, Naver was fined 1.03 billion won for abuse of market dominance on its real estate service platform. It restricted its partner realtors from providing information to customers.

This led the antitrust watchdog to reveal its plan on Sept. 28 to propose a new bill against platform operators to prevent them from engaging in unfair conduct when demand for online services was skyrocketing.

Not only internet firms like Naver and Kakao or e-commerce giants like Coupang and eBay Korea will be subjected to the new regulation, but also food delivery players like Woowa Brothers and Delivery Hero.

The online platform operators must issue a written form of contract with their business partners and they cannot take action to restrict newcomers from entering the market. Those who breach the regulation will be fined up to double the economic damage that occurred.