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After reining in Google, Apple, South Korean regulators turn to local tech giants

A woman passes by a logo sign in front of the headquarters of Kakao Corp., South Korea's leading mobile messenger service, in Seongnam City, Gyeonggi Province, South Korea. File photo by Yonhap/EPA
A woman passes by a logo sign in front of the headquarters of Kakao Corp., South Korea's leading mobile messenger service, in Seongnam City, Gyeonggi Province, South Korea. File photo by Yonhap/EPA

SEOUL, Sept. 10 (UPI) -- Fresh from passing a groundbreaking law that forces tech titans Apple and Google to loosen control of their app stores, South Korean lawmakers and regulators are turning their attention to the country's dominant online platforms, Kakao and Naver.

In a policy symposium Friday, Kim Jae-shin, vice chairman of the Korea Fair Trade Commission, said that his agency is looking to crack down on online giants that use their market dominance to unfair advantage.

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Kim said that companies such as Naver, South Korea's largest search engine, and Kakao, the country's top online messaging service, have abused their roles as "both referees and players" to drive traffic to their own products and services.

Both companies have rapidly expanded from their core businesses into sectors ranging from banking to ride-hailing to real estate to online comics, which many smaller operators say has crowded them out of the market or forced them to work at a significant disadvantage.

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"Adjusting and distorting the rules in a way that is advantageous to the company ... is prohibited and will continue to be the subject of intensive monitoring by the Fair Trade Commission," Kim said. He added that the agency will "ensure that fair competition opportunities are guaranteed" for small and medium-sized businesses.

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Last year, the Fair Trade Commission fined Naver more than $23 million for manipulating its search results to favor its real-estate, shopping and video services.

The agency is investigating Kakao over alleged unfair business practices by its taxi-hailing service, as well as e-commerce giant Coupang, which is accused of tweaking its search algorithms to highlight its private-label products.

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At a separate event on Friday, commission Chairperson Joh Sung-wook stressed the need to regulate online platforms by passing bills that would protect consumers and create more fair transactions between platforms and sellers.

Lawmakers from the Democratic Party, which holds a supermajority in the country's parliament, indicated this week that they are gearing up to take legislative action.

Rep. Jin Sung-joon said Tuesday that legislators are concerned about the "irregularities, unfairness and abuse of power that are occurring in the field of the platform economy."

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"It is time to look at the shadows cast by the platform economy and seek improvement measures," Jin said. "It is important to establish a fair and reasonable platform ecosystem while supporting innovative companies."

During a discussion Tuesday about Kakao's business expansion, Rep. Song Gab-seok said that the company, once an innovator, had turned into a "symbol of greed."

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The threat of legislative action against Kakao and Naver sent their stock prices tumbling. Kakao's value plunged by over 15% over the week, while Naver saw a 9% drop.

South Korea's focus on domestic companies comes on the heels of a bill passed at the end of last month that prevents Apple and Google from forcing mobile developers to use their proprietary payment channels, which charge commissions of up to 30% on in-app purchases of digital content.

The law, the first of its kind in the world, was hailed by developers and content creators in South Korea and abroad.

"Korea has rejected digital commerce monopolies and recognized open platforms as a right," tweeted Tim Sweeney, the head of Epic Games, after the law was passed.

"This marks a major milestone in the 45-year history of personal computing. It began in Cupertino [Calif.], but the forefront today is in Seoul."

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