[비즈한국] Companies sometimes make decisions that are difficult to explain by money alone. Understanding the underlying laws and systems can help explain the details. 'Useful Business Tips' introduces clues to help understand business trends.
These days, there is talk about the crisis of empty commercial storefronts. In reality, the sector performing the worst in the real estate market is retail, specifically commercial buildings. This was fully foreseeable; it is just that we were unaware of the changes happening over time. I can barely remember the last time I went to an offline shop, yet I am constantly buying and selling goods on online platforms. For me, online transactions are the default, and offline transactions are the exception. I only purchase at physical stores in special cases, such as for expensive luxury items or when the item price is cheaper than the shipping cost.
Given this situation, laws should be defined to suit online transactions, or at least offline and online transactions should naturally be treated equally. However, as the saying goes, "the owl of Minerva spreads its wings only with the falling of the dusk." Most fair trade laws and regulations are based on the premise of offline transactions.
For example, until recently, the Door-to-Door Sales Act prohibited online transactions, defining only offline transactions as legal. The terminology used in the Large-Scale Retail Business Act (such as "store tenants") is mostly used in offline transactions. In fact, typical cases under the Large-Scale Retail Business Act involve transactions between suppliers and large supermarkets.
Of course, existing regulations can be applied mutatis mutandis to online transactions before waiting for new legislation. However, because online transactions have unique characteristics, applying previous regulations and discussions as they are is not as easy as it seems.
For example, is it justifiable for an online platform to prohibit merchants from joining other competing platforms? Given that exclusive supply and sales cases on online platforms are not rare, it might seem justified; yet, if allowed, it appears unfair because the online platform would effectively be deciding the transaction counterparties for the merchants.
There is another case. Is it justifiable for an online platform to demand that merchants apply prices that are lower, or at least equal to, those offered on other platforms? From the consumer's perspective, it is desirable as it maintains lower unit prices; however, on the other hand, it seems unfair as it results in interference with the merchant's price-setting rights.
The reason for the difficulty in judgment is as follows: Generally, the actions of online platforms generate both 'anti-competitive effects' and 'efficiency-enhancing effects' simultaneously. Efficiency-enhancing effects include a decrease in product prices, improvement in quality, and an increase in user convenience. Deciding whether to acknowledge these efficiency-enhancing effects and whether these effects outweigh the anti-competitive ones is a difficult problem.
Another cause is the characteristic of 'multi-sided markets,' where online platforms connect different user groups. As the number of app market consumers increases, the number of app developers also increases, creating a 'cross-network effect,' and this effect leads to a 'concentration effect' where users flock to a particular online platform. This acts as a market entry barrier for other new online platforms. Because of this concentration effect, online platform efforts to improve service quality and increase user convenience are sometimes misunderstood as actions that cause anti-competitive effects.
In this article, we will examine the criteria for determining the unfairness of the 'Most-Favored-Nation (MFN) requirement,' which has recently become an issue. An MFN requirement refers to a practice where an online platform requires business users to apply transaction conditions, such as prices for goods or services traded on their platform, that are equal to or more favorable than those offered through other distribution channels.
According to the Korea Fair Trade Commission (KFTC) guidelines, MFN requirements can restrict free price competition among online platforms and hinder the entry of new platforms into the market, thereby potentially causing anti-competitive effects. On the other hand, efficiency-enhancing effects can occur if MFN requirements prevent online platform merchants from "free-riding" on the platform's promotional efforts and promote investments specialized in transaction relationships.
In addition, the KFTC considers various factors to determine unfairness, such as: the intent and purpose of the act, the means and specific contents used for the MFN requirement, the market status and share of the online platform operator, and the duration of the act and characteristics of the relevant products. However, even with the above, it is difficult to understand what is justified and what is unfair, so it is necessary to check the KFTC's position and the trend of related cases.
In its major work plan for January 2025, the KFTC announced a 'plan to revitalize fair competition in the platform market.' The plan includes promoting legislation to block the four major anti-competitive acts of massive oligopolistic platforms in six service areas, including brokerage, search, SNS, video, OS, and advertising. One of these four acts is the MFN requirement (the others are self-preferencing, tying, and limiting multi-homing).
The KFTC has been investigating suspicions of MFN requirements by delivery apps since 2024. The KFTC is investigating whether it is unfair for delivery apps to force merchants to maintain prices at least equal to those on other platforms. In response, delivery apps stated, "We are responding to policies that other competitors started first," and "There is no disadvantage to consumers as we apply the lowest brokerage fees in the industry."
Since the investigation into the above matter is still ongoing, we cannot rush to judgment regarding the outcome of the case or the unfairness of the act. From a consumer's perspective, MFN requirements are advantageous because they can always use the lowest price without platform comparison. Also, since there is no price difference between merchants, it has the advantage of promoting quality competition among the platforms themselves.
However, strictly speaking, it infringes on the merchants' price-setting rights. Furthermore, because merchants have no incentive to offer lower prices on different distribution channels, prices could ultimately be formed at higher levels, and it could solidify the market share of established online platforms while hindering the entry of new platforms.
The criteria for judging the unfairness of online platform actions have not yet been established and are currently in the formative stage. Therefore, while each side should attempt to persuade their transaction counterparties, they must also actively refer to the content discussed in related cases.