South Korean Antitrust Enforcers Target Big Tech. Then came the backlash.

The South Korean government unleashed a wave of panic in the internet industry: the country's antitrust regulator said it would issue the strictest competition law outside Europe, curbing the influence of big tech companies.

The Korea Fair Trade Commission, with the backing of President Yoon Suk Yeol, said in December it planned to submit a proposal modeled on the Digital Markets Act of 2022, the European Union's main law to rein in U.S. tech giants to keep in check. This bill also seemed to target South Korea's own internet conglomerates as much as it did the alphabets, apples, and metas of the world.

The commission said the law would designate certain companies as dominant platforms and limit their ability to use strongholds in one online business to expand into new areas.

Last week, the agency suddenly changed course. After an angry backlash from South Korean industry lobbyists and consumers, and even the U.S. government, the Fair Trade Commission said it would delay formal introduction of the bill to solicit more opinions.

It is not clear when, or even if, the bill will be brought forward. The timing was complicated by the crucial general election in April. Yoon's conservative People Power Party wants to wrest control of the legislature from the opposition Democratic Party of Korea, which has a significant majority. Surveys have shown public support for regulation, and many of the constituencies the bill claims to benefit, including smaller businesses and independent taxi drivers, have generally voted for the Democratic Party of Korea.

The delay was a temporary victory for South Korean internet companies — dominant at home but with little global influence — who lobbied against the bill behind the scenes. They had argued that the legislation was unnecessary and would ultimately benefit emerging competitors from China.

Regardless of the outcome, this episode signaled a growing need for stricter regulation of technology companies in Asia. It also underscored South Korea's concerns, which now reflect U.S. concerns about the influence of its powerful tech giants.

In South Korea, Naver, not Google, is the preferred search engine and mapping service. Coupang has become the dominant e-commerce player with efficient deliveries, and Kakao is a ubiquitous messaging service in the country, with a strong position in ride-hailing.

In the past, it was US tech giants that accused the country's regulators of overreach, arguing that their protectionist policies created an uneven playing field. But this time, Korean companies led the protest.

Park Seong-ho, chairman of the Korea Internet Corporations Association, known as K-Internet, said the regulations would limit growth opportunities. The group's members include Naver, Kakao, Coupang and Korean units Alphabet and Meta.

“A dominant platform here will be replaced by another within a few years, and the cycle will repeat itself,” Mr Park said. “It's like prematurely preventing a big, strong student with the potential to become an athlete from training, for fear he will become a bully.”

The European Union Digital Markets Act, which comes into effect next month, limits the influence of so-called gatekeeper platforms that offer dominant technology services. Companies such as Apple, Amazon, Alphabet, Meta and Microsoft have announced changes to the way they work to comply with the new rules.

But unlike South Korea, Europe does not have any thriving homegrown tech giants, whose businesses may be challenged by regulations.

Han Ki-jeong, chairman of the Korea Fair Trade Commission, said in a written statement to The New York Times that the new regulations were necessary. While the country's digital economy is flourishing, he said, “behind the innovative services and rapid growth is a frequent abuse of power by a small number of market-monopolizing platforms.”

Naver, Kakao and Alphabet declined to comment on the potential regulations.

The proposal, known as the Platform Competition Promotion Act, reflects Mr. Yoon's evolution on how aggressively to police tech companies. Two years ago he had campaigned on the principle of 'self-regulation' and minimal government intervention.

South Korea's reliance on a web of interconnected services became apparent when a fire at a facility housing Kakao's servers knocked services offline for more than a day in late 2022, disrupting communications across the country. At the time, Mr. Yoon said his government would investigate whether Kakao was a monopoly and whether it should be regulated as “national infrastructure.”

In November, Mr Yoon called Kakao's taxi app a “tyranny” and “unethical” for abusing its monopoly status. He said Kakao Mobility Corporation, a majority-owned unit of Kakao, had sold off competitors by offering low prices, only to raise them again after becoming a monopoly. He asked the committee to come up with measures to prevent abuse by dominant technology companies.

Kim Min-ho, a law professor at Sungkyunkwan University, said the shift in Yoon's position was likely related to the upcoming elections in April, when his party will try to win over small business owners, taxi drivers and delivery workers who supported the opposition party's position on regulating big tech companies. Some smaller companies have expressed support, the Korea Federation of Micro Enterprise said a questionnaire found that 84 percent of respondents were in favor of the law.

In what is expected to be a close election, Mr Kim said Mr Yoon “doesn't want to lose voters” because there are enough people who support tech regulation to influence the outcome.

The Korean regulators also faced protests from U.S. officials. In a statementThe U.S. Chamber of Commerce denounced the proposal as “deeply flawed.”

It added even more strain to the already strained economic ties between the two countries. South Korean officials were unhappy with two laws enacted under the Biden administration, the Inflation Reduction Act and the CHIPS and Science Act, which they said threatened a number of key South Korean industries: electric vehicles and semiconductors.

In a news briefing this month, Jose W. Fernandez, undersecretary for economic growth, energy and environment at the State Department, said he hoped South Korea would take into account United States concerns about the proposed bill, just as Washington listened. to Seoul about its problems with the IRA and the CHIPS and Science Act.

South Korean antitrust officials said this week they would discuss the bill with the U.S. Chamber of Commerce.

Baek Woon Sub, chairman of the Korea Platform Seller Organization, which represents about 1,500 internet companies, said the rules would “trickle down” and hurt small and medium-sized businesses. These smaller players are familiar with the rules and often work on multiple major platforms.

“Ultimately, we will have to bear the brunt of the consequences,” said Mr. Baek, who runs a small e-commerce company called EG Tech. “We won't survive.”

When asked if he thought the delay was a sign that the agency would weaken regulations or shelve them altogether, he was skeptical. He said he believed the regulator was regrouping and indicated it was listening to industry concerns.

“The Fair Trade Commission will not change,” he said. “At the end of the day, they're coming after us.”