After the G7+4 Competition Enforcers Summit, the OECD Competition Committee met to discuss ex-ante regulations to facilitate competition in the digital economy on Dec. 8. Digital markets provide new goods and services but their network effects can easily produce "winner-take-all" outcomes.
After a market tips into a monopoly, bringing back competition is structurally difficult. Currently, the advancement of information and communication technology (ICT) and the deepening COVID-19 pandemic are driving a surge in remote work, remote learning and e-commerce, further increasing the influence of tech giants across society.
Competition authorities worldwide agree that investigating abuses and designing effective remedies (ex-post enforcement) does not address digital competition problems adequately, so we need to proactively understand changing market situations via horizon scanning and build ex-ante regulatory frameworks that might vary across jurisdictions.
For example, Japan began requiring platform operators to disclose essential terms and conditions via their Act on Improving Transparency and Fairness of Digital Platforms, starting in February 2021.
By amending the German Competition Act in 2021, Germany's Federal Cartel Office (Bundeskartellamt) banned designated digital businesses (including online platforms) from self-preferencing and tie-in sales; they can fine violators up to 10 percent of their sales.
The U.S. and the European Union proposed the Package of Five Bills, the Digital Markets Act (DMA) and the Digital Services Act (DSA), which stipulate ex-ante obligations for designated gatekeeping platforms (e.g., Google, Amazon, Facebook and Apple) and ban them from self-preferencing or using most-favored-nation (MFN) clauses.
Likewise, the KFTC is fostering a fair digital ecosystem by improving our technical skills and enhancing policy. Specifically, the KFTC launched an ICT taskforce to strengthen law enforcement of online platforms and ICT sectors.
For instance, Korea's No. 1 search engine Naver manipulated its search algorithms to favor its own products and services (self-preferencing), and Google blocked new operating systems from entering the market. So, we gathered sufficient technical evidence to sanction both of them (September 2020 and September 2021, respectively).
The KFTC is also enhancing policies to reduce anti-competitive practices among online platforms, online stores and consumers with our Comprehensive Measures of Building a Fair Digital Economy in June 2020.
Our Act on Fairness in Online Platform Intermediary Transactions enhances transparency and fairness between platforms and online stores. Furthermore, our proposed amendment to the Act on the Consumer Protection in Electronic Commerce will protect consumers in platform markets, and our Guidelines for Unilateral Conduct in Platform Markets specifies enforcement standards for platforms' anti-competitive actions.
The KFTC has worked hard to foster a fair, competitive, digital economy, but we need to do more.
First, we must conduct in-depth research and analysis to better understand technologies, firms' practices and their consequences in the digital economy. Second, we must review our policies regularly to enhance them with appropriate aspects of foreign competition authorities' new laws and regulations while balancing innovation and regulation. Indeed, our proposed Act on Fairness in Online Platform Intermediary Transactions adopts soft law measures, and hence cultivates fertile ground for market participants to autonomously resolve issues ― rather than increase investigations, sanctions or platform responsibilities.
There is a popular saying in the U.K., "Smooth seas never made skilled sailors." Likewise, the challenging tidal wave of a changing digital economy requires a skillful KFTC to cooperate with other competition authorities and proactively recognize market issues on the horizon, to foster competition and innovation.
Joh Sung-wook is the chairperson of the Korea Fair Trade Commission.
