Where Sovereignty Meets Statecraft: South Korea’s Fairness Act and the U.S. Alliance

As digital markets have expanded, so too have governments’ efforts to regulate these sectors. By 2020, over 200 data protection regulations spanning international data protection instruments, local storage requirements, and data transfer treatments have been reported worldwide, per OECD estimates. The sheer size and market power of digital service providers, many of them domiciled in the United States, means that rules designed to address competition, consumer protection, or platform conduct at home often reverberate internationally, becoming sources of bilateral friction and tools for economic statecraft.

These tensions sit at the intersection of private market power and national economic influence. For host governments, regulating these firms is a question of sovereignty and market integrity. For the United States, the chief concern is if—and how—to advocate for both narrow industrial interests and economic priorities without destabilizing critical geopolitical relationships. In contrast, firms should balance short-term regulatory relief with long-term market legitimacy in an era of intensifying geoeconomic competition.

There are many areas where the United States has signaled its displeasure with partners’ digital regulation policies. The European Union’s Digital Markets Act (DMA) and Digital Services Act clearly illustrate how digital rules have become bilateral irritants between the United States and its partners.

A less widely covered, but strategically important case is the debate in South Korea over digital market regulation, where threats of broad-based U.S. tariffs have reinforced concerns in Seoul that regulatory decisions may be interpreted in Washington through a punitive trade lens rather than as exercises of sovereign governance.

President Trump’s threat to raise tariffs on South Korean exports to 25 percent and reported warnings from Vice President JD Vance against “discriminatory” digital regulation have heightened these anxieties. On January 30, South Korea’s Minister of Trade, Industry, and Resources Kim Jung-kwan met with Secretary of Commerce Howard Lutnick, without coming to a settlement but agreeing to further discussions. Yeo Han-koo, South Korea’s trade minister, will also be meeting his counterpart, U.S. Trade Representative (USTR) Jamieson Greer, to discuss the implementation of pillars from the negotiated trade deal.

The Fairness Act and its trans-Pacific disputes illustrate how, in an era of concentrated digital markets and heightened trade sensitivity, regulatory design and enforcement discretion have become tools of economic statecraft, linking domestic governance to foreign policy.

Overview of the Fairness Act: Its Objectives and Approach

The Fairness Act addresses platform-merchant dependencies, targeting “inadequacies” in existing legal protections for merchants and service providers. In attempting to reduce asymmetries between businesses and platforms, the act aims to mandate transaction transparency, payment deadlines, and advance notice of service suspension and disruptions.

South Korea’s approach reflects a deliberate trade-off between regulatory flexibility and legal predictability. Compared to European platform regulation, particularly the DMA, the Fairness Act rests on three distinctive pillars:

1. Narrow Scope: The Fairness Act is not designed to curb the market share of gatekeepers or to enhance competition among rival platforms. Instead, it focuses exclusively on transactional relations between platforms and service-providing businesses. Fifty percent of merchant proceeds “must be deposited by the platform into a financial institution,” to be paid out within 20 days of a given transaction.
2. Wide Net: Designation thresholds are relatively low—approximately $68 million in annual platform transactions or $6.8 million in annual platform revenue—and only apply to domestic (South Korean) revenue. Unlike the European DMA, which targets a small cohort of U.S. technology firms as gatekeepers, South Korea’s lower thresholds broaden the act’s jurisdiction to medium-sized enterprises.
3. Discretionary Implementation: Regulators’ operational mandates resemble sectoral regulation more than traditional competition law. This includes the establishment of an Online Platform Brokerage Dispute Mediation Council and enforcement powers, including “investigations, corrective orders, consent resolutions, and fines.”

These distinctions matter not just for regulatory design, but for how the legislation will be perceived internationally. A transactional fairness approach focused on specific merchant protections may be easier to defend as legitimate governance than broad structural interventions, yet flexible standards can create more friction by raising questions about regulatory predictability and equal application.

Areas of Contention

Debate within South Korea reflects broader uncertainty over how to balance market fairness with a constructive trade relationship with the United States.

Supporters argue these tools are better suited to digital intermediation than traditional competition law. The TMON and WeMakePrice incident—where the platforms were unable to pay their providers, affecting 470,000 buyers and 56,000 sellers, with damages estimated at ₩1.5 trillion—is frequently cited as evidence of regulatory gaps. Representative Kim Nam-geun argued that shortening settlement cycles by law could prevent platforms from diverting funds and limit merchant losses. In November, legislators publicly discussed removing “Online Platform” from the title, and other revisions to the bill, including removing the “fee cap.”

One central concern among critics in U.S. trade policy circles is the enforcement discretion. In a congressional hearing, Representative Adrian Smith argued that “regulatory authorities appear to be aggressively targeting U.S. tech firms.” According to the Wall Street Journal, the USTR shares these concerns, having canceled a meeting with South Korean officials due to Seoul’s “digital regulations and actions against U.S. tech firms.” These allegations include that enforcement will punish U.S. players for their market performance, contravene existing U.S.-South Korea trade agreements, and provide a window for Chinese companies to enter and expand their presence in the South Korean market.

How Reasonable Are the Concerns?

While the Fairness Act is not de jure discriminatory, it is also unlikely to be de facto discriminatory. Perceptions persist, however, of unequal enforcement within the South Korean Fair Trade Commission (KFTC) and an intent to pursue broader digital regulation if the Fairness Act is enshrined into law.

Acknowledging the competitive nature of these markets and the impact that such digital regulation would have on both U.S. and South Korean firms is crucial to engaging in evidence-based dialogue. In terms of search engines, the largest actor within South Korea is not Google, but Naver, which accounts for nearly 63 percent of the search share. In e-commerce, Coupang is the largest firm, but Naver, AliExpress, Temu, and Gmarket are all significant players. While Google, Apple, and Meta maintain significant portions of the South Korean market in areas like application stores, video platforms, and operating systems, across multiple domains, the market leaders are South Korean companies—including in food delivery (Baemin), rideshare (Kakao), and digital advertising (Naver).

South Korean authorities, similarly, have sought to emphasize that the law is intended to be applied in a nationality-neutral manner. According to KFTC Chair Ju Biung-ghi: “This bill is not about targeting U.S. companies.. .. It’s about dealing with unfair practices and imbalances that can arise in platform-based transactions.”

Nevertheless, critics argue that the act imposes unequal enforcement and would serve as a pathway toward broader regulatory intervention. More traditional competition policy, like the proposed Online Platform Act, has been deprioritized in favor of the Fairness Act due to trade tensions with the United States. In the interim, KFTC Chair Ju has stated that South Korea would strengthen existing enforcement mechanisms instead of pursuing new “platform-specific [frameworks].” This shift underscores how enforcement can substitute for perceived regulatory gaps and how international pressure reshapes domestic policy.

Situating these disputes in the broader relationship is imperative. South Korea remains a critical U.S. technology partner. Samsung and SK Hynix dominate global markets for DRAM, NAND flash, and OLED displays—components central to U.S. economic security. South Korea’s indispensability is reflected in the U.S.-ROK Technology Prosperity Deal, where both countries aligned on collaboration to “promote U.S. and Korean AI exports across the full stack of AI hardware, models, software, applications, and standards.” The technological alignment and supply chain integration between the United States and South Korea underscores why regulatory disputes in the digital sector carry outsized strategic weight.

Policy Implications

Digital markets vary across jurisdictions in structure, competitive dynamics, and regulatory tradition. Recent bilateral commitments frame how U.S.–South Korea commercial relations should be evaluated. In November 2025, President Lee Jae Myung’s joint statement with President Trump and the U.S.-South Korea Strategic Trade and Investment Deal reaffirmed principles of nondiscrimination, committing that U.S. companies would not “face unnecessary barriers in terms of laws and policies concerning digital services.”

South Korea’s proposed Online Platform Fairness Act reflects legitimate domestic concerns about protecting merchants, but its global impact will depend on Seoul and Washington distinguishing genuine governance concerns from regulatory overreach. Crucially, coming to a shared understanding of what constitutes “discrimination” and “unnecessary barriers”—especially when de facto discrimination claims are anticipatory as opposed to realized—will require a tailored and balanced approach to these bilateral regulatory disputes.

• Framework: U.S. policymakers should be careful to distinguish between regulations that serve domestic regulatory objectives and those that function as trade barriers. Presuming protectionist intent delegitimizes efforts to design guardrails tailored for country- and market-specific needs and would invite retaliatory measures that undermine supply chain integration and alliance cohesion.
• Testing Allegations of Discrimination: While concerns over enforcement discretion and unequal implementation are valid, the United States should not infer that the Fairness Act has de facto or de jure discriminatory intent, particularly given the act’s narrow sectoral approach and broad designation to South Korean, U.S., and third-country digital platforms.
• Institutionalizing Engagement: Maintaining bilateral relations and managing regulatory divergence will require clear procedural standards and consultative mechanisms. Minister Kim and Minister Yeo’s engagements with Secretary Lutnick and USTR Greer are a step in the right direction toward institutionalizing these dialogues. Seoul should clarify operational interpretations of “unfairness,” and transparently engage with both domestic and foreign stakeholders on enforcement criteria. Washington, in turn, should be cautious in approaching the act as a trade violation, recognizing the effect such a chill could have in areas of bilateral strategic interest.
• Two-Track Approach: Sometimes, combining issues can lead to a grand bargain otherwise not possible; other times, they add extra complexity to an already difficult discussion. The negotiations over trade and investment agreements are exceedingly complex, as are the ongoing discussions around digital regulation. Combining the two topics threatens to derail both critical priorities, limiting the ability of the partners to cooperate on critical sectors, including shipbuilding and digital services.

The Fairness Act will test whether the United States and South Korea can manage regulatory differences without sacrificing strategic cooperation. How Washington responds will signal to allies worldwide whether legitimate domestic governance invites trade retaliation. Constructive dialogue and transparent enforcement could model how to navigate digital governance conflicts between partners. Trade threats, meanwhile, would fragment the technological partnerships that underpin both countries’ competitiveness.

Philip A. Luck is director of the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Richard Gray is a program coordinator and research assistant with the Economics Program and Scholl Chair in International Business at CSIS.

The authors thank Hannah Amran for her research assistance for this piece.