Concerns about a Second TADA Incident: Problems and Tasks of the `Zigbang Prohibition Law`

1. Key Provisions of the So-Called “Zigbang Ban Act”

(Amendment to the Licensed Real Estate Agents Act)

Recently, concerns have been raised that a second “Tada incident” may occur following the introduction of a legislative amendment that would institutionalize the Korea Association of Realtors (hereinafter “KAR”) as a statutory body and substantially restrict the activities of proptech companies. On October 4, 24 lawmakers led by Democratic Party lawmaker Kim Byung-wook introduced a partial amendment to the Licensed Real Estate Agents Act (Bill No. 2117738), which has since been submitted to the National Assembly’s Land, Infrastructure and Transport Committee.

The key provisions of the amendment include:
First, granting statutory status to KAR;
Second, mandating compulsory membership in KAR upon registration of a brokerage office;
Third, granting KAR the authority to establish ethical codes for licensed real estate agents;
Fourth, granting KAR enforcement authority over acts that disrupt transaction order and the right to request administrative sanctions against member agents who violate the law.

In effect, this amendment grants preferential treatment to KAR, an interest group. If passed, KAR would obtain an exclusive legal status as a statutory body and gain not only supervisory authority over its members through self-established “ethical codes,” but also enforcement powers and the right to request administrative penalties against violators.

Meanwhile, rapidly growing real estate platforms such as Zigbang and Hogangnono—collectively known as the proptech industry—have strongly opposed the amendment. This opposition stems from KAR’s repeated efforts to restrain the growth of competing proptech firms, including filing multiple criminal complaints against companies offering lower brokerage fees and consumer-friendly services.

According to a YTN report (October 22, 2022), a proptech industry representative stated:
“The Realtors Association has persistently obstructed agents from listing properties on platforms like Zigbang. If a vested-interest group that creates such conflicts is granted legal authority, it is obvious that this will become a second Tada incident.”

Given the risk that the amendment may function as a de facto ban on proptech firms such as Zigbang and Hogangnono, it is necessary to examine its problems and identify appropriate countermeasures.

2. Legislative Background: Rapid Growth of the Proptech Market and Conflict with KAR

Proptech—a combination of “property” and “technology”—refers to industries and services that integrate IT technologies such as big data, artificial intelligence, and VR/AR into construction and real estate (Kang Jun-hee, 2021). Its main areas include real estate development, brokerage and leasing, and smart construction.

The proptech sector has grown rapidly in recent years. The number of related companies increased from 114 in November 2019 to 376 in November 2022—more than a threefold increase in three years. The combined revenue of 138 proptech startups reached KRW 1.9884 trillion (Korea Proptech Forum, as of November 14, 2022). By sector, companies are distributed as follows: shared services (19.1%), marketing platforms (17.6%), property management (15.2%), data and valuation (13.7%), construction solutions and XR (10.5%), and interior and design services (6.6%).

Cumulative investment in proptech startups reached KRW 5.8569 trillion as of November 2022, driven largely by increased demand for non-face-to-face, IT-based services during the COVID-19 pandemic (Han Areum, 2022).

The Ministry of Land, Infrastructure and Transport has also recognized proptech as a promising emerging industry and announced support policies in 2020 and 2021, including the First Basic Plan for the Promotion of the Real Estate Service Industry (2021–2025) and measures to foster new real estate industries.

Amid this rapid growth and government support, KAR has increasingly come into conflict with proptech firms, driven by a sense of crisis. At a policy seminar hosted by Rep. Choi Seung-jae on September 22, KAR argued that platforms were encroaching on licensed brokers’ business domains and emphasized the need to protect small business operators.

In practice, KAR has repeatedly filed lawsuits against proptech companies such as Naver Real Estate, Zigbang, Dawon Brokerage, and Jiptos—many of which offer half-price commissions or charge fees only to landlords—most of which resulted in dismissals. Conversely, KAR itself has been found guilty in court rulings and subject to corrective orders by the Fair Trade Commission, highlighting its role as a source of repeated conflicts and disputes.

3. Risks of a Second “Tada Incident”: Problems with the Amendment
◩ High Risk of Collusion and Market Monopoly by KAR, Which Lacks Broad Representativeness

The first core provision of the amendment is the institutionalization of KAR as a single statutory association and mandatory membership upon brokerage registration. This raises serious concerns that granting monopoly status to an interest group will restrict fair competition in the real estate brokerage market and lead to rigidity and monopolization.

Currently, brokers may choose between KAR and the New Korea Association of Realtors. Under the amendment, mandatory membership in KAR would eliminate freedom of association and block the formation of new organizations.

As of 2021, approximately 467,000 individuals held real estate agent licenses, while only 121,543 were practicing brokers (Q1 2022). KAR has about 114,000 members, while the New Association has approximately 35,461 members. Thus, only 24.4% of license holders belong to KAR, raising serious questions about its representativeness.

◩ Risk of a Second Tada Incident: Obstruction and Sanctions Against Innovative Proptech Firms

The second core provision grants KAR enforcement authority over transaction-order violations and the right to request administrative sanctions against members. KAR has already been the main instigator of business interference, complaints, and lawsuits against innovative proptech firms offering lower fees and consumer-friendly services.

If enforcement authority currently entrusted to the Korea Real Estate Board were transferred to KAR, the association could obstruct legitimate business activities of proptech startups under the pretext of “disrupting transaction order.” Since KAR also operates its own real estate platform (“Hanbang”), this raises serious concerns over conflicts of interest, anticompetitive collusion, and a repeat of the Tada incident—ultimately delivering a major blow to the entire proptech market.

◩ Infringement of Consumer Choice and Rights in Brokerage Services

Competition among proptech firms has expanded consumer choice and welfare by offering lower or tenant-free brokerage fees. However, if KAR abuses its enforcement and disciplinary powers following the passage of the amendment, proptech firms may scale back operations, leading to higher fees, reduced choice, declining service quality, and diminished innovation in real estate brokerage services.

4. Policy Responses and Tasks

In conclusion, the amendment to the Licensed Real Estate Agents Act (Bill No. 2117738), submitted on October 4, should be withdrawn or rejected by the standing committee due to:

the risk of anticompetitive collusion and monopoly by KAR;

the likelihood of a second Tada incident harming the rapidly growing proptech market; and

infringement of consumer choice in real estate brokerage services.

The Ministry of Land, Infrastructure and Transport has expressed concerns over potential misuse of the amendment and its negative impact on emerging proptech industries, indicating that it will convey a cautious review opinion (Dailian, November 2, 2022). The Fair Trade Commission has also warned in prior reviews that granting exclusive authority to a specific association could restrict business activity and induce anticompetitive conduct, urging careful consideration.

Proptech marketing services help reduce information asymmetry by providing detailed data on neighborhood conditions, property value, and location, thereby facilitating transactions (Koo Kang-mo, 2022). To ensure the continued development of the proptech market and expand consumer welfare, the government should accelerate regulatory reform, enhance real estate data infrastructure, and expand access to public information in line with existing support policies (Lee Jung-yoon et al., 2021).

Such efforts would promote digital transformation in the real estate sector, foster new products, and enable lower-cost transaction services with more affordable brokerage fees. Furthermore, shifting from conflict to fair competition and cooperation between traditional real estate businesses and proptech firms—along with easing excessive data-protection regulations—will help Korea’s proptech industry establish a competitive position in the global market.

Korean version: https://www.cfe.org/bbs/bbsDetail.php?cid=issue&pn=2&idx=25095