[Free Speech Forum] If Platform Companies Are Tied Down, Who Will Innovate?

The “Kakao outage” became a turning point that sharpened the blade of regulation aimed at platform companies once again. On October 15, a fire broke out at the SK C&C data center in Pangyo, paralyzing Kakao’s services. As a result, citizens who had grown accustomed to the convenience of these services experienced significant inconvenience and came to feel the influence of platform companies firsthand. It also served as a reminder that when problems arise at platform companies like Kakao, whose operations are intertwined with numerous industries and stakeholders, unimaginable social repercussions can follow. Since then, discussion about the social role and responsibilities of platform companies has become increasingly active.

Regulation of platform companies has already been discussed many times. Last year, the Korea Fair Trade Commission enacted the Online Platform Fairness Act to eradicate unfair practices in the online platform market and realize a fair digital economy. In Korea, unfair trade practices involving the abuse of superior bargaining position have frequently occurred in other industries, and there is considerable experience regulating such conduct through separate special laws. For that reason, there is particularly strong interest in regulating unfair trade practices by online platform operators against the merchants and businesses that use their platforms.

Globally, regulation of online platforms has centered on government-led ex ante regulation. The United States has enacted laws to curb monopolistic behavior by major platform companies such as Google, Apple, Facebook, and Amazon, and is actively pursuing platform regulation by appointing officials who hold critical views of platform companies. The European Union created the “Regulation on promoting fairness and transparency for business users of online intermediation services” in 2020 and plans to bring into force the “Digital Markets Act,” which will impose various obligations on giant platform companies. China has issued guidelines on antitrust regulation of platform companies and is stepping up regulation in earnest by imposing fines on major platform firms such as Alibaba for abusing their market dominance.

We should avoid indiscriminately introducing foreign regulations without carefully comparing and analyzing domestic market conditions. Current Korean regulation has been heavily influenced by the online platform regulations being developed in the European Union and the United States. However, the objective of those foreign regulations is to prevent the monopoly power of big tech, and the only firms that meet the stated regulatory thresholds are global companies such as Google, Amazon, Facebook, and Apple. By contrast, Korean platform companies, unlike those leading global firms, are still in a growth stage. Therefore, rather than regulating platform companies, we should help them grow to their full potential. Domestic regulation may even be avoided by foreign firms, leaving Korean companies completely behind their overseas rivals before they have even finished their growth phase. Accordingly, when adopting foreign examples, they must be viewed with an accurate understanding of the context of the relevant country and market.

Regulation of platform companies is a prison that confines innovation. Online platforms are characterized by dynamic technological development, rapid market change, and continuous innovation, and with this flexibility they drive change in the world. They are also not part of a market that is already complete, but of one that will continue to develop in the future. However, regulations that tie companies’ hands and feet obstruct innovation and ultimately harm users as well. Therefore, regulation of online platforms must take these points into account, and government regulation must not negatively affect dynamism and the possibility of sustained growth.

Minyoung Jung, Intern Researcher, Center for Free Enterprise (CFE)

Original title: [자유발언대] 플랫폼 기업 손발 묶으면 혁신은 누가 하나

Author: Min-young Jeong

Date: 2022-12-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=7&idx=25216