KFTC drafts policy to prevent platform monopolies

Woowa Brothers' headquarters in Songpa-gu, eastern Seoul, is seen in this file photo. / Yonhap

By Kim Jae-heun

The Korea Fair Trade Commission (KFTC) said it will submit a new law to prevent possible power abuse by online platform operators such as Woowa Brothers and Naver.

The size and influence of online business here have increased because of the COVID-19 pandemic and the antitrust watchdog is seeking to enact legislation to prevent leaders in the field from monopolizing the market and taking advantage of their superior position.

First, the KFTC is set to propose a law regulating the transactional relationship between platform operators and entrants. It wants to establish a legal basis to intervene in setting commission rates and allocating costs for promotional activities of small- and medium-sized enterprises that are vulnerable to unfair contract terms.

The country's second largest food delivery player Yogiyo, operated by Delivery Hero Korea, has previously forced restaurant owners to offer the cheapest price on their platform and the antitrust watchdog imposed a 468 million won penalty for price manipulation.

Baedal Minjok, the No.1 player operated by Woowa Brothers that is under review for a merger with Germany's Delivery Hero, also had to revise a similar unfair clause designed to divert its responsibility to the seller when a transactional problem arises between a restaurant and customer.

As a result, the KTFC changed its original plan to provide new guidelines next year after going through internal deliberations and decided to draft legislation.

This is because once small businesses enter a particular platform, it is hard for them to adapt to another platform. The European Union has already passed a similar law and Japan is preparing to do the same.

However, the KFTC said it does not want to discourage new platform operators from entering the market or impede industry innovation.

"The law will focus on preventing platform operators from forcing entrepreneurs to cut their product price excessively ... They will not be allowed to obstruct small business from entering other open markets operated by different platform operators or push them to take full responsibility when an incident happens," a KFTC official said.

The new law will also affect merger and acquisition conditions too. Previously, only firms with a certain amount of annual sales or total combined assets had to report for review.

Starting from December, if the antitrust watchdog sees an M&A case can threaten the market by eliminating new competitors from appearing, the merging firms will be required to report their business deal. This will also apply to Delivery Hero's acquisition of Woowa Brothers that is currently undergoing examination.

The new guideline targeting online retail giants such as Coupang and Market Kurly will come into effect at the same time near the end of this year. Firms with over 100 billion won of revenue will be restricted from passing on delivery costs to their subcontractors.

The KFTC will also order online platform operators to revise clauses that impact sellers and end users alike as there has been many complaints reported to the government body related to online food delivery applications and over-the-top services.

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