Research Report
A Study on the Regulation Method of Monopoly Platform Operators
Ⅰ. Backgrounds and Purposes
○ Globally, the platform economy has reached a size of $16.6 trillion by 2022, accounting for 16% of global GDP.
- In this study, we analyze the harmful effects of monopolistic platforms and the limitations of enforcement of the current competition law as a means to resolve them, and review how overseas legislative measures are taken against monopolistic platform operators, and review the online platform law (draft) currently proposed to the National Assembly. The purpose is to analyze the current status of and then suggest appropriate disciplinary measures to effectively regulate monopoly platforms.
Ⅱ. Major Content
▶ The harmful effects of monopoly platforms and the need for special regulations
○ The harmful effects of monopoly platforms
- There are cases where domestic and international platform operators quickly monopolize the relevant platform or strengthen their monopoly power and expand into other platform markets through the network effect and tipping phenomena.
- In terms of the dual status of the platform as both the operator of the market and a competitor, and in terms of the formation of an ecosystem centered around core platform services and the transfer of monopoly power, the harm of the monopoly platform is emerging.
○ The necessity of special regulation of monopoly platforms and limitations of the current Fair Trade Act
- Existing competition law regulations are limited to regulating market dominance in a specific market, and intervention is possible only after complex and extensive fact-finding and verification. Therefore, it takes a long time to proceed with the procedure, and in the meantime, there is a problem that the platform market is already monopolized.
▶ Legislative examples of major overseas countries related to the discipline of monopoly platform operators
○ EU
- The Digital Markets Act (DMA), which imposes obligations by proactively designating GAFA (Google, Apple, Facebook, Amazon), etc., which serves as the gatekeeper of the digital market, has been in effect since November 1, 2022.
- The EU "Digital Markets Act" applies to business operators designated as gatekeepers who provide core platform services to business users or end users in the EU.
- Businesses providing core platform services are obligated to report if they meet quantitative requirements, and the EU Commission designates those who meet qualitative requirements as gatekeepers, and reviews the need for designation every three years.
- When the Commission designates a gatekeeper, it is necessary for the operator to prove that the designation is unfair because the qualitative requirements are not met.
- It stipulates various behavioral requirements and prohibitions against gatekeepers such as prohibiting the most favored nation clause (MFN), prohibiting the use of business operator data for competition, prohibiting preferential treatment to themselves, prohibiting multi-homing, guaranteeing the right to access data, and guaranteeing data mobility.
- The gatekeeper is obliged to comply with the requirements of conduct and the prohibitition of conduct and has the burden of proving that it has complied with it.
- The gatekeeper may take interim measures if urgent because there is a risk of causing significant and irreparable damage to business users or end users.
○ GERMANY
- The 10th amendment to the “Prevention of Competition Restrictions Act (Gesetz gegen Wettbewerbsbeschränkungen: GWB),” which designates monopolistic platform operators and imposes obligations to prohibit acts, came into effect on January 19, 2021.
- The subject of application of Article 19a of the Anti-Competition Act is a person designated as a business operator who is overwhelmingly competitive and has the importance of regardless of boundaries between markets.
- The Federal Cartel Authority may determine the necessity of designation while also determining whether the relevant business operator has violated the prohibition act, and the effect of designation may last for up to five years.
- If the relevant act is objectively justified, there is no violation of the prohibited act, and the burden of proof rests with the enterprise.
- Article 19a of the Prevention of Competition Restrictions Act applies as a complementary measure to the cases where EU DMA is not applicable.
○ UK
- On April 25, 2023, The Digital Markets, Competition and Consumers Bill (draft) was introduced to the House of Commons, which would amend parts of the “Competition Act 1998” and “the Enterprise Act 2002.”
- The subject of the “The Digital Markets, Competition and Consumers Bill (draft)” is an operator designated as a business operator with a strategic market status.
- If a platform operator meets certain quantitative and qualitative requirements, the Competition and Markets Authority (CMA) can designate it as a business with strategic market status.
- The Competition Markets Authority must meet the standards of fair dealing, open choices, trust and transparency when imposing conduct requirements and prohibited activities.
- The Competition Market Authority may impose one or more conduct requirements on operators with strategic market status and change the conduct requirements imposed.
- If the Competitive Market Authority determines that it is necessary to prevent acts in order to prevent serious harm and prohibit conduct that can reduce effectiveness at other stages or to protect public interests, an “interim enforcement order” may be imposed even during the investigation.
▶ Current status and analysis of domestic laws (drafts) related to the discipline of monopoly platform operators
○ Current status of pending legislation in the National Assembly
- As of August 31, 2023, a total of 18 bills for the regulation of online platforms were proposed to the National Assembly.
- These bills can be divided into two types: the so-called ‘Online Platform Fairness Act (draft)’, which can be said to be the mainstream of online platform regulation legislation, and the so-called ‘Online Platform Monopoly Regulation Act (draft)’, which has been recently proposed.
○ Main contents of the Online Platform Fairness Act (draft)
- ‘The Online Platform Fairness Act (draft)’ regulates the relationship between platform operators and users (business operators). It is enough for a platform operator to be in a transactional position that allows it to abuse its superior position in its relationship with user operators, and it is not necessary to have a monopoly position.
- The ‘Online Platform Fairness Act (draft)’ focuses on the transaction relationship between platform operators, which mediates a two-sided market, and user operators in order to regulate the superior-subordinate relationship that arises in the transaction relationship between platform operators and user operators. The transaction relationship between platform operators and consumers is not subject to regulation.
○ Main contents of the Online Platform Monopoly Regulation Act (draft)
- Since the “Online Platform Monopoly Regulation Act (draft)” regulates the monopoly problems of platform operators, the standards of platform operators subject to regulation are much higher than the “Online Platform Fairness Act (draft).”
- The ‘Online Platform Monopoly Regulation Act (draft)’ is intended to regulate monopoly problems of platform operators that occur in the platform market. Primarily, it regulates acts of forming or strengthening market entry barriers to limit competition in the platform market and acts of restricting competition between platform operators.
- In addition, the ‘Online Platform Monopoly Regulation Act (draft)’ targets exploitative acts that occur between platform operators and users (business operators), competition restrictions, and transaction relationships between platform operators and consumers.
▶ Special regulatory measures for monopoly platform operators
○ Methods of Discipline of Monopoly Platform Operators
- By designating the monopoly platform in advance, it is necessary to reduce the time required to define the market and prove market dominant status, and to increase the predictability of regulation by knowing in advance which operators are subject to monopoly platform regulation.
- It is necessary to prescribe in advance the major prohibited acts that may occur to the monopoly and oligopoly platform operators, transfer the burden of proving the illegality of the prohibited acts to the platform operators, and introduce an interim suspension order t to enable prompt regulation.
○ Designation method for monopoly platform operators
- In the case of Korea, appropriate quantitative standards should be established by reflecting the platform market conditions and economic conditions, which are different from those of overseas markets. However, the basic standard would ultimately have to be the volume of revenue (domestic and global revenue) as with the EU and UK. In addition, the criteria for the number of users (the number of consumers or the number of service providers) should be properly considered.
- However, it is necessary to limit the scope of application so that only a very small number of giant platform operators are eligible by strengthening the application requirements in consideration of the weight of the regulation.
- The Fair Trade Commission does not always have to designate a platform operator that meets quantitative standards as a monopoly platform operator that requires special regulations, and should decide whether to designate it after a thorough market survey in consideration of market conditions and whether qualitative standards are met.
- In some cases, the need for designation may not be significant, and in this case, the Fair Trade Commission should not designate the operator as a monopoly platform operator that requires special regulations.
○ Methods of Disciplining Prohibited Activities of Monopoly Platform Operators
- In regulating prohibited acts of monopoly platform operators that require special regulations, rather than having them universally comply to all prohibited acts, it is desirable to select and designate certain prohibited acts to the platform operator in consideration of the type of behavior that is particularly problematic of the operator.
Ⅲ. Expected Effects
○ Expected Policy Contribution
- Contributing to the enactment of the Online Platform Monopoly Regulation Act (draft) by examining the harmful effects of monopoly platforms, the need for special regulation of monopoly platforms, and the status of overseas regulatory legislation, and suggesting desirable disciplinary measures for monopoly platforms.