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Gov't to put stricter regulations on Naver's e-commerce

Naver Corporation's headquarters in Seongnam, Gyeonggi Province / Korea Times photo by Bae woo-han
Naver Corporation's headquarters in Seongnam, Gyeonggi Province / Korea Times photo by Bae woo-han

By Kim Jae-heun

With the results of Korea Fair Trade Commission's (KFTC) probe into Naver to be released in two weeks, attention has shifted toward the upcoming direction of the government putting regulations on the IT giant's e-commerce activities.

Naver is alleged to be abusing its power in the online search market for "unfair business practices" in its online shopping platform. Naver operates the country's largest search engine that handles over 70 percent of all web searches in Korea.

In October 2018, eBay Korea, which operates e-commerce firms including Auction and Gmarket, reported to the country's top antitrust regulator that Naver is prioritizes its business members by putting their products at the top of search results when people search for certain shopping items. Those who allegedly received Naver's benefits were sellers registered as members of Naver Pay or Smart Store, Naver's online shopping mall for small dealers.

Naver was given an enforcement order and penalized for the same alleged illegality in the real estate business, raising the possibility of the country's dominant web portal operator to be restricted further by the government in the upcoming decision.

Naver strongly denied the allegation saying it is impossible to prioritize specific products in search results.

"All the search results are exposed according to Naver's algorithm system, which cannot be fixed to show certain items at particular spots," a Naver official said.

An industry source refuted that Naver is in a business relationship with sellers on its Smart Store, where it receives ad fees from them. "Obviously, Naver is exposing its clients' products in a better spot on its online shopping platform," the industry source said.

Last year, Naver surpassed two previous top players Coupang and eBay Korea to ascend to the throne of the local e-commerce industry. Online transactions worth a total 20.92 trillion won were made on Naver, which was an all-time high.

Starting its price comparing service for online shoppers in 2000, Naver launched the open-market Shop N in 2013 and changed its name to Store Farm, which is now called Smart Store.

It has been showing consistent massive growth and in only the first half of this year, 35,000 companies joined Naver's online shopping platform, which is 61 percent up from last year's first half.

This is worrying players in direct competition with Naver that it is taking full advantage of its powerful search engine system and leaving others no chance to fairly compete with the IT giant.

This year, Naver has launched an additional shopping page for popular brands, which made it a de facto online department store.

"Smart Store we can understand as only small businesses can sell products there. But operating Brand Store is totally a different story. It is like a referee also playing as an athlete in a sports game," an industry source said.


Naver Corporation's headquarters in Seongnam, Gyeonggi Province / Korea Times photo by Bae woo-han
Naver Corporation's headquarters in Seongnam, Gyeonggi Province / Korea Times photo by Bae woo-han

By Kim Jae-heun

With the results of Korea Fair Trade Commission's (KFTC) probe into Naver to be released in two weeks, attention has shifted toward the upcoming direction of the government putting regulations on the IT giant's e-commerce activities.

Naver is alleged to be abusing its power in the online search market for "unfair business practices" in its online shopping platform. Naver operates the country's largest search engine that handles over 70 percent of all web searches in Korea.

In October 2018, eBay Korea, which operates e-commerce firms including Auction and Gmarket, reported to the country's top antitrust regulator that Naver is prioritizes its business members by putting their products at the top of search results when people search for certain shopping items. Those who allegedly received Naver's benefits were sellers registered as members of Naver Pay or Smart Store, Naver's online shopping mall for small dealers.

Naver was given an enforcement order and penalized for the same alleged illegality in the real estate business, raising the possibility of the country's dominant web portal operator to be restricted further by the government in the upcoming decision.

Naver strongly denied the allegation saying it is impossible to prioritize specific products in search results.

"All the search results are exposed according to Naver's algorithm system, which cannot be fixed to show certain items at particular spots," a Naver official said.

An industry source refuted that Naver is in a business relationship with sellers on its Smart Store, where it receives ad fees from them. "Obviously, Naver is exposing its clients' products in a better spot on its online shopping platform," the industry source said.

Last year, Naver surpassed two previous top players Coupang and eBay Korea to ascend to the throne of the local e-commerce industry. Online transactions worth a total 20.92 trillion won were made on Naver, which was an all-time high.

Starting its price comparing service for online shoppers in 2000, Naver launched the open-market Shop N in 2013 and changed its name to Store Farm, which is now called Smart Store.

It has been showing consistent massive growth and in only the first half of this year, 35,000 companies joined Naver's online shopping platform, which is 61 percent up from last year's first half.

This is worrying players in direct competition with Naver that it is taking full advantage of its powerful search engine system and leaving others no chance to fairly compete with the IT giant.

This year, Naver has launched an additional shopping page for popular brands, which made it a de facto online department store.

"Smart Store we can understand as only small businesses can sell products there. But operating Brand Store is totally a different story. It is like a referee also playing as an athlete in a sports game," an industry source said.


Kim Jae-heun jhkim@koreatimes.co.kr


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