Korea’s Move to Ex Ante Competition Regulation Discriminates against U.S. Business

A few months ago, Scholl Chair analysis noted that several countries around the world are considering similar competition policy approaches to the European Union’s Digital Markets Act (DMA), which requires so-called gatekeepers—mostly large U.S. digital services providers—to adhere to ex ante competition policy rules that preempt various potential future behaviors. The DMA embodies a competition policy paradigm popular at the European Commission where regulators are empowered to determine which potential business behaviors might hurt competition and define competition in a broad fashion. This approach is very different from the U.S. tradition of ex post enforcement based on how corporate actions might impact consumer welfare. It now appears the EU approach is contagious, as Korea’s pro-tech government has tabled a DMA-like bill that would unfairly target U.S. platforms while giving Chinese platforms a pass, a policy very much not in U.S. companies’ interests.

On December 19, as Koreans’ attention was turning to the holiday season, the Korea Fair Trade Commission (KFTC) announced its intention to introduce the Act on Promotion of Platform Competition, a digital regulation bill that follows President Yoon Suk Yeol’s earlier instructions to “prepare measures to reduce the harm caused by the monopoly of large platforms.” It would prevent targeted platforms such as Google from presumed practices such as self-preferencing (for example, favoring their own services on a platform), tying (requiring end users to use their browser, identification, or payment services, for example) and restricting multi-homing (connecting computer networks) and platforms’ access to and transfer of data.

The proposed act follows a 2022 amendment to Korea’s Telecommunications Business Act to prevent large platforms, especially Apple and Google, from forcing developers to use their in-app payment systems. It can be seen as doing Korean small businesses a favor on the eve of Korea’s April legislative elections, but it would also undercut U.S. business interests in Korea’s large and booming digital market. It targets online platforms with average market capitalization of at least KRW 30 trillion (USD 23 billion), average annual revenue from platform services of at least KRW 3 trillion (USD 2.3 billion), and with at least 10 million average monthly users or at least 50,000 average monthly business users—meaning that likely Google, Meta, Apple, Korean company Naver, and Coupang, the so-called Amazon of Korea that is actually a U.S. company, would likely be targeted.

Korean company Kakao, which runs a highly popular messaging app KakaoTalk, may not exceed the market cap threshold (with $18.6 billion market cap in 2024). It is unclear what the proposed act would mean to Samsung’s internet browser installed on Samsung Galaxy. Meanwhile, Chinese tech giants like Alibaba, Tencent, and TikTok parent company ByteDance would likely get a pass—there were some 7.6 million TikTok users in Korea in 2022.

Korea’s proposed act and the bills under discussion set limits that unfairly target U.S. companies which will, in turn end up helping Chinese companies gain larger market share. Alibaba and TikTok have recently been amplifying investments in Korea, and Alibaba subsidiaries Aliexpress and Temu are rapidly gaining market share in Korea. What’s more, Korea is not alone in exploring DMA-type laws—Brazil, Turkey, and Australia have similar bills, and others such as Japan, India, and South Africa have been studying new competition policy frameworks for the digital era. The United Kingdom also has a DMA-like bill, albeit a more flexible one.

Besides the national security implications, the emerging competition policy frameworks also entail compliance costs that may be passed on to consumers and small businesses. A 2022 CSIS Scholl Chair report estimated that the DMA’s immediate potential negative impacts could rise to tens of billions of dollars in Europe and the United States and undermine U.S. digital services exports.

So far, the U.S. Congress has declined to pass bills that would similarly hobble U.S. digital service providers. A notable and a bipartisan group of members of Congress has also repeatedly warned the Biden administration about the discriminatory impacts of Europe’s DMA on U.S. companies. Unfortunately, the administration has yet to effectively stand up to the DMA and laws introduced by key U.S. trading partners and allies like Korea, reflecting a broader retreat in this area. The administration last year effectively abandoned leadership of the global digital trade agenda, a move that assists China in its efforts to set the rules of the game. The tech sector is the United States’ leading exporter, job creator, driver of investment gains, and investor in innovations that benefit our businesses and national security. The White House should be leading in the effort to develop global rules rather than let foreign governments undercut U.S. industry.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Kati Suominen is an adjunct fellow (non-resident) with the Scholl Chair in International Business at CSIS. 

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Kati Suominen
Adjunct Fellow (Non-resident), Scholl Chair in International Business