Lazar Radic

South Korea recently abandoned plans for the Platform Competition Promotion Act (PCPA), legislation inspired by the European Union's landmark Digital Markets Act (DMA), which aimed to establish strict competition rules for digital platforms such as Google, Apple, Amazon, and Meta. Instead, the Korea Fair Trade Commission (KFTC) and President Yoon Suk Yeol's government have expressed support for amendments to the existing Fair Trade Act.

While an alternative and more aggressive framework proposed by the opposition party in July modeled on the PCPA may still pass the Korean National Assembly, the amendments proposed by the Yoon administration are touted as a more palatable alternative to the DMA model, following concerns that ex-ante digital-competition rules would strangle innovation and growth and put domestic companies at a disadvantage.

But despite some notable differences, the proposed amendments draw on some of the same flawed principles as the PPCPA. In particular, in cases where designated digital platforms are accused of self-preferencing, tying, or imposing most-favored nation (MFN) clauses or restrictions on multi-homing, the amendments would raise fines, essentially reverse the burden of proof, and allow interim orders including cease and desists to be issued immediately.

To be sure, the proposed amendments are a marked improvement on the DMA. They would not only prescribe market-share thresholds as a prerequisite for firms to be caught by the new rules, but also require a case-by-case showing of dominance. It also appears — though it is not certain — that they would give targeted companies more leeway to mount a defense, such as by showing pro-competitive efficiencies.

But the proposed amendments also appear to replicate many of the DMA's flawed principles, such as placing the burden of proof on the business operator. On the surface, it is hard to see the rhyme or reason for extending this discriminatory treatment to a heterogeneous range of companies and services.

Below that surface analysis, however, the rationale becomes clear when one understands the proposed amendments as an extension of a broader protectionist agenda coupled with effective regulation of dominant domestic platform businesses. It doesn't take much of a leap of logic to conclude that the amendment's thresholds and scope were reverse-engineered to disproportionately capture a pre-selected group of successful, mostly U.S.-based technology companies that have disrupted traditional industries and established domestic incumbents.

Indeed, the primary reason the Platform Competition Promotion Act has been postponed was because the ruling People Power Party (PPP) and the government were persuaded that the new rules would also put South Korean firms at a competitive disadvantage. But why should they put any company at a disadvantage?

As I have argued with Geoffrey Manne and Dirk Auer in a paper forthcoming in the Berkeley Business Law Journal, the real goal of digital competition regulations is to redistribute rents, protect competitors, and level down “gatekeepers” by hamstringing their competitive position—even at the expense of consumer welfare. With the proposed amendments, the KFTC and the government appear to want to “level down” U.S. tech companies like Google, Apple, and possibly Coupang. Apart from harming South Korean consumers, however, this would also unnecessarily strain bilateral trade relations with the U.S., one of South Korea's primary trading partners.

While traditional antitrust law accounts for industry idiosyncrasies on a case-by-case basis, it generally treats companies equally, regardless of their business models or the products and services they sell. Imposing ex-ante digital-platform regulations alongside competition rules could lead to double jeopardy. However, introducing these exogenous principles for oversight of digital platforms into the existing antitrust statute might subvert the prevailing system's logic by emphasizing bigness, structural presumptions, and sui generis rules in ways that could eventually spread to other sectors and undermine the integrity, consistency, and predictability of the law.

There is a common misconception in South Korea that a “global regulatory consensus” supports subjecting digital platforms to heightened regulatory standards. But despite the EU's intense advocacy and vociferous claims of regulatory leadership, no such consensus exists. Many of the arguments that underpin that supposed consensus have been challenged, such as the notion that self-preferencing is always harmful, that closed platforms are inherently anticompetitive, and that size and market structure are good proxies for competitive outcomes. Further, only a handful of countries have actually passed ex-ante digital competition rules, while many key jurisdictions, including the United States, have not. The DMA's supposed “Brussels Effect” has not materialized, as gatekeepers continue to carve out inferior versions of their products for the EU market. South Korea should continue to seek to avoid a similar fate by reconsidering the enactment of ex-ante DMA-style regulation or ex-post rules that, although nominally different, ultimately inflict the same flawed approach to digital markets. Such an approach could stunt innovation in Korea and create unnecessary trade frictions in the U.S.-South Korea bilateral relationship.

Lazar Radic is assistant professor of law at IE Law School, Madrid, where he teaches administrative law, economic regulation, and competition law. He is also senior scholar for competition policy at the International Center for Law & Economics, Portland.