- The Korea Fair Trade Commission (KFTC) announces measures for improving monopoly and unfair business practices in the platform sector after consultations with the ruling party -
On September 9, the Korea Fair Trade Commission (KFTC) presented its report on "Promoting Fair Competition in Platforms and Legislative Directions for Preventing the Recurrence of the TMON and Wemakeprice Incidents" at a consultation with the ruling party. It also announced its legislative agenda for improving regulations related to monopolies and unfair business practices in the platform sector.
Background
Online platforms have become integral to people's daily lives and have contributed to innovation and growth. However, there has been increasing demand for fairness in the market. To address this, the government has responded with various measures, including voluntary regulation (cooperative agreements) and proactive law enforcement to ensure fairness in the online platform market.
Despite these efforts, anti-competitive practices, such as monopolistic platforms blocking the market entry of competitors or driving them out, still occur frequently. Additionally, incidents like the TMON and Wemakeprice cases highlighted the need for supplementary measures to protect economically weaker players such as small businesses on these platforms.
In response, the KFTC has decided to quickly and effectively address the negative impacts of monopolies in the rapidly changing platform market. As a follow-up measure to prevent the recurrence of incidents like those involving TMON and Wemakeprice, the KFTC will propose legislation to strengthen protections for sellers on e-commerce platforms, including regulations on the timely settlement of payments.
Legislative Directions
1. Monopoly Sector (Promoting Platform Competition): Revision of the Fair Trade Act
In the area of platform monopolies, the KFTC plans to amend the current Fair Trade Act to swiftly curb anti-competitive behaviors and protect market competition.
The regulations will target dominant platforms with overwhelming market influence. These platforms will be identified retrospectively if a violation occurs, a shift from the initial plan of pre-designation. The criteria for identifying dominant platforms will be stricter than the existing standards for market-dominant businesses under the Fair Trade Act. Platforms with annual revenues of less than 4 trillion KRW will be exempt to alleviate concerns about regulatory burdens on startups.
The specific criteria include:
- A single company with a market share exceeding 60% and over 10 million users, or
- Three or fewer companies with a combined market share exceeding 85%, each having more than 20 million users.
The regulations will cover six key service areas—intermediation, search, video, SNS, operating systems, and advertising. Four anti-competitive practices will be prohibited: self-preferencing, bundling, restricting multi-homing, and demanding most-favored-nation clauses. Dominant platforms will be required to bear a higher burden of proof corresponding to their influence, while still being allowed to defend against claims of anti-competitive behavior if no harm to competition is proven.
For violations, penalties will be strengthened, with fines for abuse of market dominance increased from the current 6% of relevant sales (under the Fair Trade Act) to 8%. An interim suspension order system will also be introduced to quickly halt anti-competitive practices.
2. Unfair Practices Sector (Platform-Seller Relationships): Revision of the Large Retail Business Act
In the area of platform-seller relationships, the KFTC will strengthen protections for economically weaker sellers (the "contractors") by improving relevant regulations.
To prevent a recurrence of incidents like TMON and Wemakeprice, the KFTC plans to revise the Large Retail Business Act to enhance protections for sellers on large platforms. Two different regulatory options are under consideration, taking into account both the need to strengthen protections and concerns about stifling innovation and growth for small and medium-sized platforms.
The revised law would include certain online platforms that mediate transactions of goods and services above a specific size. The two regulatory options include:
- Option 1: Platforms with annual intermediary transaction revenue exceeding 10 billion KRW or transaction volume over 100 billion KRW.
- Option 2: Platforms with annual intermediary transaction revenue exceeding 100 billion KRW or transaction volume over 1 trillion KRW. Final decisions on the platform size criteria will be made after further consultations.
For platforms subject to regulation, obligations will include compliance with payment settlement deadlines and the separate management of funds. Additionally, current regulations under the Large Retail Business Act ensuring transparency and fairness in transactions will also be applied to these platforms.
The settlement deadline for online platforms will be shortened from the 40-day deadline applicable to traditional retail businesses (under the Large Retail Business Act). Two options are being considered:
- Option 1: Between 10 and 20 days after the confirmed purchase date (end of the cancellation period).
- Option 2: Within 30 days of the end of the monthly sales period.
If the platform directly receives payments, it will be required to separately manage the sales proceeds, with two options for management:
- Option 1: 100% of the sales proceeds (excluding fees)
- Option 2: 50% of the sales proceeds.
In addition, the KFTC plans to apply other provisions under the Large Retail Business Act to online intermediary transactions, including the requirement for written contracts, standard contract forms, restrictions on passing promotional costs to sellers, and prohibitions on exclusive dealing and interference with business operations.
Future Plans
For the amendments to the Fair Trade Act, consultations with the National Assembly will proceed swiftly, as the content has already been agreed upon with relevant ministries. For the proposed revisions to the Large Retail Business Act, which are still under consideration, the KFTC will hold public hearings to gather opinions before finalizing the plan in September.