A moment of decision: wide-ranging implications of Korea's proposed platform competition promotion act

Robert D. Atkinson

Korea’s digital transformation is at an inflection point. The Korean Fair Trade Commission’s (KFTC) proposal to enact the Platform Competition Promotion Act (PCPA), modeled on the European Union’s Digital Markets Act (DMA), risks radically reshaping the nation’s framework for regulating and promoting its emerging digital markets.

The PCPA will mean following the path of the European Union, a region with an anemic, also-ran digital industry. Korea should ensure its continuous development as an innovation leader by rejecting the EU model and instead following the light-touch path of the United States into the digital future.

Good regulation should be a response to market failure and supported by a sound body of evidence that confirms that government intervention will improve the situation, rather than make it worse. But Korean digital markets have not failed.

On the contrary, they are on the cusp of turning Korea into an innovation leader not just in Asia but around the world. Specifically, many dynamic Korean digital companies — Coupang, Gmarket, Kakao, Naver, and others — are poised to rapidly grow both in Korea and throughout Asia.

The PCPA is therefore a solution in search of a problem. But will the solution even work? The evidence suggests that it will not. First, the logic of burdensome regulation behind the DMA is a primary reason that the European Union, unlike the United States, does not enjoy a thriving digital industry: regulation makes it harder for companies in the EU to make money and invest in innovative technologies. Indeed, Korea’s competitiveness in industries like computers and electronics was not the result of regulation, but innovative entrepreneurs supported — not hindered — by government policy.

The KFTC’s decision to fast-track digital regulation through parliament should be replaced with a careful study of the effects of DMA legislation both in Europe and around the world to analyze whether it is the best choice for Korea if, in the future, its digital markets stall. If so, then the KFTC will have the incentive and ability to enact sound regulatory reform to strengthen its digital markets. If not, Korea will have avoided the risk of self-inflicted harm to its economy. In other words, common sense dictates that Korea takes a wait-and-see approach rather than engage in a regulatory race to the bottom. Holding off another year or two in order to assess the results of the EU’s risky regulatory experiment is the prudent thing to do.

The rise of artificial intelligence only exacerbates these risks of regulatory damage. Like the internet decades ago, artificial intelligence is on the verge of radically transforming society and producing immeasurable benefits for consumers and society (including labor). And without question, AI will also be crucial to national security. However, the development of AI is premised upon the very vibrant digital markets that the PCPA could very well strangle in the cradle. In other words, not only will it stifle the maturation of Korea’s first-generation digital markets, but could have devastating next-generation effects.

In addition to these serious economic effects, the PCPA would unfairly discriminate against American companies like Alphabet, Amazon, Apple, Meta, and others. For example, why should Apple be regulated by Samsung, as both companies compete in the mobile space? Such double standards are simply inconsistent with the Yoon administration’s affirmation of Korea’s l0ng-standing commitments not just to innovation-friendly policies but an unshakable relationship of trust with the United States. With the increasing geopolitical risks from an assertive China, neither nation can risk disruptions in this key alliance.

In fact, the PCPA will have profound consequences for Korea’s position on the world stage. As former U.S. National Security Advisor Robert O’Brien has explained, targeting American companies could significantly hinder relations between the two nations at a time when coordination is increasingly important to counter Chinese aggression and an emboldened North Korea. In other words, while China is heavily subsidizing its digital industries and strengthening its influence on the Korean peninsula, the KFTC risks damaging its digital ecosystem and undermining a burgening U.S.–Korea “technology alliance.”

Korea stands at a crucial point in its digital evolution and mirroring the EU’s failed approach is a bad idea. Embodying legislation that does not remedy a clear problem, the PCPA instead jeopardizes Korea’s thriving digital markets and strays from its path to becoming a global innovation leader. Rather than stifle Korea’s digital markets just when they are on the verge of blossoming, as well as strain the crucial U.S.–Korea alliance by targeting American companies, Korean policymakers should double down on the pro-innovation regulatory policies that have helped make Korea successful and will carry it forward as a leader into the 21st Century.

Dr. Robert D. Atkinson (@RobAtkinsonITIF) is the president of the Information Technology and Innovation Foundation (ITIF), an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. The views expressed in the above article are those of the author and do not reflect the editorial direction of The Korea Times.