The Collapse of the Platform Law: What Does It Mean?

The recent announcement by the Fair Trade Commission (FTC) regarding the amendments to the Fair Trade Act aimed at promoting fair competition in platform businesses has raised significant concerns.

The recent announcement by the Fair Trade Commission (FTC) regarding the amendments to the Fair Trade Act aimed at promoting fair competition in platform businesses has raised significant concerns. Originally intended to establish a new law to regulate monopolistic practices among platform companies, the plan has shifted towards merely amending existing regulations, sparking debate and disappointment in the industry.

On September 9, the Fair Trade Commission unveiled its amendment proposal titled "Fair Trade Act Amendments for Promoting Fair Competition in Platforms." This announcement comes in the wake of rising distrust towards platform companies, especially after the Timemef incident, which highlighted the need for better protection for vendors using these platforms.

The FTC's shift from proposing a new law to modifying the existing Fair Trade Act has drawn considerable attention and criticism. Initially, the FTC had aimed to create the "Platform Fair Competition Promotion Law" to directly address the monopolistic practices of major platform businesses. However, after nine months of deliberation, they opted to amend existing laws instead.

1. Shift from Prior Designation to Post-Facto Assessment: The original proposal intended to use a proactive approach similar to the EU's Digital Markets Act (DMA), which would identify dominant platforms beforehand and implement specific regulations. Instead, the new proposal will determine dominance only after a violation occurs.

   

2. Criteria for Dominant Platforms: A company will be considered dominant if it has over 60% market share and more than 10 million users, or if up to three companies hold over 85% of the market with each having more than 20 million users. However, startups with annual revenues below 4 trillion won will not be classified as dominant platforms to protect emerging businesses.

3. Increased Accountability and Penalties: Dominant platforms are prohibited from engaging in four key unfair practices across six sectors, including search and social media. If violations occur, penalties can reach 8% of the platform's revenue, and interim suspension orders may be issued.

The FTC also proposed that online intermediary platforms must settle sales payments within a specified timeframe to prevent situations similar to the Timemef crisis.

Industry Reaction:

The FTC's recent decisions have led to interpretations that they have taken a step back due to industry pushback. The proposed platform law is now seen as effectively nullified, as the FTC abandoned the idea of creating a new legislative framework, opting instead to amend existing laws. Many believe that to effectively manage the diverse unfair practices arising in the evolving platform market, a separate law should be established.

The FTC's recent amendment proposals indicate a significant retreat from the ambitious goals of creating a comprehensive platform law. This has generated skepticism about whether the revised measures can adequately address the complexities of the current digital market and protect vendors from monopolistic practices. As the industry watches closely, the effectiveness of these changes in fostering a fairer competitive landscape remains to be seen.